Binance USD (BUSD), a stablecoin issued by Paxos for popular cryptocurrency exchange Binance, has experienced a substantial decline in market capitalization. The decline is estimated to be over 90% from its peak value in the previous year. According to data from CoinGecko, BUSD’s market cap plummeted from an all-time high of $23.5 billion, recorded on November 15, 2022, to the current value of approximately $2.1 billion.
Compared to other stablecoins such as USDT and USDC, BUSD’s market cap is significantly lower. USDT boasts a market cap of $84 billion, while USDC’s market cap stands at $25 billion.
Regulatory Actions Impacting BUSD
“The decline in BUSD’s market cap can be partly attributed to regulatory actions taken against its issuer, Paxos,” says an industry expert.
Earlier this year, both the Securities Exchange Commission (SEC) and the New York District of Financial Services (NYDFS) initiated regulatory actions against Paxos, the US-based company behind BUSD. These regulatory actions have had a direct impact on BUSD’s market cap, as investors and traders are becoming cautious due to the uncertainty surrounding its issuer.
In response to these regulatory actions, Binance, the cryptocurrency exchange that uses BUSD, has announced that it will transition away from BUSD and encouraged its users to convert their BUSD holdings to FDUSD. FDUSD is a new stablecoin issued by Hong Kong-based company First Digital Group.
First Digital USD (FDUSD) Gaining Market Share
“As a result of Binance’s decision, First Digital USD (FDUSD) has been gaining traction,” states a crypto market analyst.
The market cap of FDUSD has soared to nearly $470 million, as reported by CoinGecko. Binance users can easily trade BUSD for FDUSD without incurring any fees. In addition, Binance plans to gradually decrease support for BUSD products by February 2024, aligning with their earlier announcement.
Despite the decline in BUSD’s market cap, the impact on Binance’s overall operations is expected to be minimal since the exchange is proactively phasing out support for BUSD in response to regulatory pressure.
