On October 3rd, the Binance exchange announced that it would be closing all outstanding BUSD loans and collateral positions at the end of the month (October 25th). Users can still borrow and lend on Binance using stablecoins like USDT, DAI, TUSD, and USDC. Notably, Binance is encouraging users to convert their held BUSD into the Hong Kong FDUSD stablecoin.
Currently, users can still lend their BUSD on Binance at an estimated annual interest rate of 3%, and BUSD will continue to be supported at a 1:1 ratio with USD until support ends in February 2024.
It appears that the discontinuation of BUSD support by Binance is part of a gradual phase-out of this struggling stablecoin, in compliance with increased regulatory scrutiny. Previously, the exchange removed BUSD from the Secure Asset Fund for Users (SAFU), stating that this removal was a strategic move to protect users, as the market capitalization of BUSD was declining.
Legal pressure is evidently a significant factor in Binance’s decision to remove BUSD. Earlier this year, Paxos, the company that issues BUSD, announced a pause in issuing the stablecoin and the cessation of conversions from BUSD to cash and treasury bonds in February 2024 after facing regulatory action in the United States.
Since then, the circulating supply of BUSD has rapidly decreased from over $20 billion to approximately $3 billion.