Binance Switches to the TUSD Stablecoin

The Binance USD stablecoin or BUSD is under scrutiny. Regulators in the US are targeting the BUSD. However, don’t get fooled into thinking that Binance is in trouble. For now, they let BUSD cool off and focus on a different stablecoin to enable trades, TrueUSD or TUSD. 

So, let’s dive in and see what this means for Binance and the BUSD.

What Is the TrueUSD (TUSD) Stablecoin?

TrueUSD or TUSD is a stablecoin backed by fiat money. TrueCoin LLC is the owner/issuer and launched in April 2018. The US Dollar backs this stablecoin 1:1. TrueCoin LLC implemented the Chainlink Proof of Reserve. This controls minting with on-chain verification in real time. At the same time, it shows off-chain reserves.

Besides TUSD, TrueCoin LLC also offers TCAD, TGBP, and TAUD. 

• TrueCAD is a Canadian dollar backed stablecoin. 
• TrueGBP is a GBP backed stablecoin. 
• TrueAUD is an AUD backed stablecoin.

In May 2018, Binance listed this stablecoin on its exchange. That same year, it reached a market cap of $100 million. In September 2020, it hit the $500 million market cap mark. According to CoinGecko, its current market cap is $1.142 billion.

Part of this increase in the market cap, is that Binance now mints TUSD. Instead of the plagued BUSD, they use TUSD to facilitate transactions. During the last week of February, Binance minted no less than $130 million TUSD. Because of this, TUSD is now ranked fifth in the market cap for stablecoins.

It’s also a regulated stablecoin. Since October 2022, it received authorization in Dominica as an official digital currency. Furthermore, it’s also a medium of exchange in this country. In the US, it’s also compliant with some regulatory platforms. For instance, with the US Financial Crimes Enforcement Network (FinCEN). Or the Bank Secrecy Act. It’s also available on twelve public blockchains. For example, Ethereum, Tron, BSC, Polygon, or Fantom. 

You can mint and redeem it on their website, after depositing USD as collateral. You can also use it as a hedge against crypto volatility or in DeFi. The picture below shows the real-time supply of three of their stablecoins in blue. Black represents the escrowed fiat.

Source: Trust Explorer

Binance and BUSD

It’s not Binance that mints the BUSD stablecoin. That’s actually Paxos, a crypto firm, based in New York City. They also have offices in London and Singapore. However, in January 2023, the NYDFS ordered them to stop issuing BUSD. That’s the New York State Department of Financial Services.

This caused the BUSD market cap to drop from $16 billion to $10 billion. However, Paxos assured that all their BUSD supply is backed by dollars. In other words, BUSD holders can redeem their tokens. Since 21st February 2023, Paxos stopped issuing new BUSD tokens.

The SEC also stepped in, and they may take action as well. They may view BUSD as an unregistered security. In case the SEC decides to start a lawsuit, it might have complications for all stablecoins in the US. There’s a lot to say about whether a stablecoin is a security or not. However, this is a different debate that is worth following.

In the meantime, Paxos mentioned that BUSD holders can redeem their token. This will be possible until at least next year. Binance acted fast and moved to minting TUSD. This seems like their current answer to the BUSD situation. However, it remains an open question if they will stick to TUSD. This all depends on how the BUSD situation develops. It’s quite possible that Binance and Binance.US may look for a new issuer.

Conclusion

Currently, it looks like Binance will keep minting TUSD. It’s unlikely that Binance will enter into either USDC or USDT to enable their trading. In the long term, Binance will prefer to have direct or indirect control over a stablecoin like BUSD. So, the last word about this developing story is still up in the air. TUSD is available on many exchanges around the world as an alternative to USDC or USDT.

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