The cryptocurrency exchange, Binance, will convert its users’ holdings of three stablecoins – USDC, USDP and TUSD – into its own BUSD stablecoin.
Binance removes USDC and other stablecoins in favor of BUSD
In a lengthy post on the company’s website, cryptocurrency exchange Binance, announced that its users will undergo a conversion of balances in three stablecoins USDC, USDP, TUSD into its own BUSD coin. The company’s stated goal would be to improve liquidity and capital efficiency for users.
— Binance (@binance) September 5, 2022
Auto-conversion will become effective as of 03:00 AM (UTC) on 29.09.2022. Users’ balances will be automatically converted into BUSD.
The action effectively removes the USDC stablecoin, which is currently the second largest in the world with a market capitalization of nearly $52 billion (against the $67.5 billion of the first USDT), from the tradable assets on Binance’s platform.
— Watcher.Guru (@WatcherGuru) September 5, 2022
The move could be a blow to Circle, the issuer of the stablecoin, but it could also represent yet another challenge against Coinbase, Binance’s rival exchange, which is partnering with Circle on the USDC project.
The USDC stablecoin
USDC is a relatively new stablecoin pegged to the US dollar, launched on 26 September 2018, in partnership between Circle and Coinbase. USD Coin is a service to tokenize US dollars and facilitate their use on public blockchains. In addition, USDC tokens can be restored to USD at any time. The issuance and redemption of USDC tokens is secured with an ERC-20 smart contract.
The USDP Project
USDP is Paxos’ native cryptocurrency, a stablecoin that uses the Ethereum blockchain and is issued by the Paxos Trust Company, which also developed Binance’s stablecoin, BUSD, in 2019.
The TUSD stablecoin
TUSD (TrueUSD) is a stablecoin issued by TrustToken, a San Francisco-based exchange. TrueUSD was released in early 2018. It is designed to be a simple, transparent and reliable stablecoin. Because of this, it does not use a hidden bank account or any special algorithm. TUSD and USDP are ranked fifth and sixth with market capitalizations of $1 billion and $945 million, respectively.
Binance, the autoconversion of USDC, USDP, and TUSD into BUSD
Clearly, as Binance explains in its post, users will be able to withdraw funds in USDC, USDP and TUSD at a 1:1 ratio to the account balance denominated BUSD:
“Existing USDC, USDP and TUSD balances in user accounts will be automatically converted to BUSD at 2022-09-29 03:00 (UTC) (“Auto-Conversion”). All users will be able to see the converted balance on their accounts within 24 hours.”
The minimum amount for manual conversion will be 1 USDC, USDP or TUSD. User balances less than 1 USDC, USDP or TUSD will be converted as part of the automatic conversion.
Binance will remove and cease trading the following spot pairs at 03:00 AM (UTC) on 26-09-2022: USDC/BUSD, USDC/USDT, USDP/BUSD, USDP/USDT, TUSD/BUSD, and TUSD/USDT.
The company’s post, which invites users to turn to the exchange’s FAQ section, reads:
“Users will be able to view their USDC, USDP and TUSD balances under the BUSD denominated account balance when the conversion is complete. All pending trade orders will be automatically removed after trading ceases in each respective trading pair. Users can then trade the assets in the respective BUSD trading pairs.”
How loans and futures will be handled
The change will also affect the futures section of the exchange relating precisely to USDC, which will be automatically converted as of 03:00 AM (UTC) on 29 September. The company therefore urges users not to trade at the time of conversion so as not to risk losses:
“Binance is not liable for any losses for new positions during this period that may incur due to the conversion of funds. Users of the Portfolio Margin Program are advised to transfer USDC out of their Margin Wallet to their Spot Wallet and to top up their margin balance, if required, before 2022-09-23 03:00 (UTC).”
Binance will stop offering margin loans for USDC/BUSD, TUSD/USDT and USDC/USDT, at 03:00 AM (UTC) on 07 September 2022. The exchange will also cease margin trading on these pairs and all open margin positions will be closed and liquidated at 03:00 AM (UTC) on 23 September 2022. In addition, trading of the three stablecoins with major cryptocurrencies such as Bitcoin, ETH, Tether, and ADA will also be discontinued.
Binance then goes on to explain:
“All pending trade orders will be automatically removed after trading ceases in each respective trading pair. Users can then trade the assets in the respective BUSD trading pairs.”
This is perhaps a bit of a surprise move on the part of the world’s first exchange, which is evidently affected by the problems experienced by the cryptocurrency market in recent months, which has also affected stablecoins, especially after the collapse of the Terra ecosystem and its stablecoin UST. And it is with this in mind that Binance is trying to protect itself by still prioritizing its stablecoin BUSD, which currently with $19.5 billion market cap ranks as the sixth most capitalized cryptocurrency.
It will now remain to be seen what impact this decision may have on the three stablecoins, which are heavily traded on the exchange, and it also remains to be seen how Binance users will react to this unilateral decision, which should inevitably force them to turn to the BUSD stablecoin, which becomes along with Tether as the only alternative for those who wanted to park their funds on a stablecoin.
BUSD on the other hand is 100% guaranteed by liquid reserves and treasury bills held by the Paxos company. The stablecoin is also guaranteed in case it loses its peg to parity with the dollar, because whenever the price of BUSD starts to fall below $1 for 1 BUSD, arbitrage traders will buy large amounts of the stablecoin.