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"BUSD is natively issued on Ethereum, thus limiting its usage outside of the Ethereum ecosystem. In order to extend BUSD's utility to other blockchains, Binance offers a wrapped version of the stablecoin, Binance-Peg BUSD, which is designed to track the value of the original, ERC-20 BUSD at a 1:1 ratio. "Wrapping" tokens is blockchain lingo for creating versions of the original asset that are transportable to other chains for the sake of increasing interoperability and the interconnectedness of the digital asset space. Normally, the value of wrapped tokens is secured by locking the collateral of the original asset, which is the case with Binance-Peg BUSD."

Binance issues BUSD on other chains, including its own-brand blockchain Binance Chain. Together these amount to about a third of the total issuance of BUSD. It doesn't create it out of thin air but uses the Ethereum BUSD as the 1:1 backing asset. This wrapping of a token to make it usable on another blockchain network is commonplace in crypto, but not without risks. The obvious ones are who has keys to the wallets and how to ensure the 1:1 backing is in sync. It turns out that BUSD on other chains was not always 1:1 backed in the past, although Binance said it rectified the process last year. It claimed the issues were a timing difference and it now rebalances more regularly.

Paxos Trust will stop minting new Binance USD (BUSD) tokens starting from February 21, 2022 in accordance with directions and coordination with the New York Department of Financial Services (NYDFS). All existing BUSD tokens will remain fully backed and redeemable through Paxos until at least February 2024. Customers will be able to convert their BUSD tokens to Pax Dollar (USDP) another Paxos-issued stablecoin.

Binance has launched a function allowing users to instantly convert from other stablecoins into BUSD. The ratio to convert PAX, USDC and TUSD into BUSD will be set at 1:1 with zero fees. The ratio to convert USDT into BUSD will vary based on the current market price.

"Recent news reports have shone a light on Binance-Peg BUSD ("PBUSD") and how it doesn't always appear to have been completely backed by BUSD issued by Paxos. PBUSD is minted on several blockchain networks including BNB Chain, Avalanche, Polygon, and TRON. PBUSD has always been, and continues to be, 100% collateralized. However, the collateral has not always been stored in a single, dedicated wallet in real time so that the 1:1 backing was not always immediately visible to users. Binance undertook a project to centralize the collateral in a single, dedicated wallet; this was completed on 04 January 2023 so that users have visibility into the 1:1 backing of PBUSD. Minting of PBUSD now only takes place after collateral is added to the dedicated wallet. Centralization of collateral for all Binance-backed tokens into dedicated collateral wallets will be completed by 09 February. This will be visible in the Proof of Reserves system that we are continuing to develop."

Paxos will now disclose on a monthly basis the specific financial instruments backing its USDP and BUSD stablecoins, in addition to its attestations. These reports will provide the CUSIP numbers of all instruments backing USDP and BUSD, showing that Paxos only backs its stablecoins with cash, overnight loans secured only by US Treasuries, and US Treasuries with a less than 90 day maturity. As a Trust Company chartered by the New York State Department of Financial Services ("NYDFS"), Paxos is legally required to hold all regulated stablecoin reserves in bankruptcy remote, fully-segregated accounts and in only cash and cash equivalents.

"It's likely the Circle NYDFS complaint did not refer to the Ethereum stablecoin for which Paxos is responsible. Binance issued pegged stablecoins using the same BUSD branding on other blockchains, which were meant to be backed one-for-one by the Ethereum BUSD issued by Paxos. However, records show they were not fully backed at all times in the past. Binance claimed there was a process issue resulting in timing differences which have been corrected."

Binance effectively banished USD Coin (USDC), the second-biggest stablecoin, from trading at its cryptocurrency exchange in favor of its own competing product. On Sept. 29, customers' holdings of USDC will be converted to Binance USD (BUSD). The same will happen with two smaller stablecoins: Pax Dollar (USDP) and TrueUSD (TUSD).  The action effectively removes USDC as a tradable asset on one of the most prominent perches in crypto, and creates a headache for Circle Internet Financial, USDC's issuer, as the company mulls an IPO.

Coinbase will suspend trading for Binance USD (BUSD) on March 13, 2023, on or around 12pm ET. The decision was based on the exchange's internal monitoring and review processes, which  determined that it no longer met Coinbase's listing standards. Customers will still have access to and be able to withdraw BUSD funds.

"I've been asked at least 5+ times today what is going on with BUSD, why USDC withdrawals were halted, what wrapped/pegged/bridged BUSD is, why [insert stablecoin here] is going to zero, and other increasingly hysterical questions."

Binance holds $74.7 billion worth of tokens of which around 40% are in its own BUSD US dollar-pegged stablecoin and its BNB native coin. Of the $74.6 billion termed as networth, about $23 billion was in BUSD and $6.4 billion in BNB. The exchange has also allocated 10.5% of its holdings in Bitcoin and 9.8% in Ether. While Binance shared details of its reserves, the dashboard does not break down how much of the assets are its own holdings, versus those of its customers.

"At face value, it's a vote of confidence for tokens like USDC and USDP, with Binance effectively stating that the value of those tokens are reliable enough to be allowed permanent 1-to-1 redemption with its own BUSD across withdrawals and deposits. Tether's USDT, the largest stablecoin by market value, was notably left out of the party."

Also, according to a Wall Street Journal (WSJ) report, the US Securities and Exchange Commission (SEC) has issued Paxos a Wells Notice for allegedly selling unregistered securities by issuing BUSD. That characterization  typically hinges on the Howey Test, under which an investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."

The NYDFS reportedly said that Paxos was unable to administer the token in a "safe and sound" manner and "violated its obligation to conduct tailored, periodic risk assessments and due diligence refreshes of Binance and Paxos-issued BUSD customers to prevent bad actors from using the platform.

An article by Circle Chief Economist Gordon Liao distinguishes stablecoins' use in trading versus payment activities and their impact on financial stability. Payment stablecoins like Circle's USDC have lower speculation exposure than trading stablecoins like Tether's USDT, MakerDAO's DAI, and Binance's BUSD. Two measures are presented as evidence; the total crypto trading volume facilitated by the stablecoin in question versus the amount of it in circulation, and the correlation between the change in stablecoin circulation and crypto-asset returns. Dai shows the highest correlation with crypto-asset returns because it is collateralized with crypto-assets, so a decrease in the asset collateral's value can prompt the forced redemption of the stablecoin.

The U.S. Federal Reserve (Fed) published a paper that explored the March 2023 USDC stablecoin depeg as a means to learn more about the complexities of stablecoin markets, with an emphasis on distinguishing between primary and secondary market dynamics during a stablecoin crisis. In the end, the analysis, which compared the market dynamics of the four largest stablecoins by market capitalization (USDT, USDC, BUSD and DAI), found more questions than answers, and called for additional theoretical and empirical investigation.

Ever since Bitcoin crashed to $3,850 in mid-March, fiat-backed stablecoins have been printing like crazy, with their market cap growing at a fast speed. During this time, the market cap of Paxos has surged 20% and USDT's 40%. While Circle and Coinbase's USDC market cap jumped 55%, Binance's stablecoin BUSD saw the biggest spike of 85%.

Binance recently announced that Margin Insurance Fund has been bled dry by liquidations, and they are now putting their own "profits" into the fund to try and replenish it. The Insurance Fund is designed to use the collateral from fees on non-bankrupt clients to cover losses when the client accounts go below 0 in value, to limit the occurrences of counterparty liquidation. During the recent flash crash billions was liquidated, probably bleeding the Insurance Fund dry. Binance has also reduced the interest rates on flexible savings on USDT/BUSD from 6.5% to 2%.

The market capitalization of Tether (USDT) stablecoin has crossed the $50 billion mark, with the supply on Tron's blockchain ($26 billion) exceeding that on Ethereum's ($24.4 billion), because ransaction fees are lower, and confirmation times faster on Tron. Most of the Tron-based Tether's supply is on the lightly-regulated Binance, Huobi, and OKEx platforms. USDT remains the largest stablecoin by market capitalization, with about 66% market share, followed by USDC (17%) and BUSD (9%).

Paxos Trust lawyer and chief compliance officer Dan Burstein claims that Tether's USDT and Circle's USDC are unregulated "stablecoins" in name only. Paxo-issued Paxos Standard (PAX) and Binance Dollar (BUSD) are approved and regulated by the New York State Department of Financial Services (NYDFS). That means each token is backed by reserves in the safest instruments, such as bank deposits insured by the US Federal Deposit Insurance Corporation or short-term maturity US Treasuries. Gemini Dollars (GUSD) issued by Gemini Trust Company, are similarly NYDFS regulated