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Coinbase also noted that users will be able to withdraw their existing BUSD assets whenever they choose.
Cryptocurrency exchange Coinbase has officially suspended BUSD trading on its platform. The decision follows from the earlier announcement by company CEO Brian Armstrong that the company would delist BUSD.
Recall that Coinbase claimed that BUSD no longer measured up to its listing standards after an internal review of the asset. Armstrong cited concerns that its users will not be able to get liquidity if Paxos stops minting BUSD.
Following that announcement, there was a surge in withdrawals on Binance as traders rushed to convert their BUSD assets to dollars. Data from Nansen showed net outflows of about $788.5 million from Binance within the 24 hours after the announcement.
Despite suspending BUSD, Coinbase noted that users can still withdraw their existing BUSD assets whenever they choose. Paxos also assured all its customers that its assets are SAFU. The firm will continue to process redemptions of the asset till February 2024.
Suspension of BUSD Trading Not Good for Binance
In the opinion of Bradley Duke, co-chief executive at ETC Group, the Paxos story is not good for Binance. Binance depends on BUSD to maintain liquidity on its platform, especially in jurisdictions like the US.
Recently, Binance has prioritized using BUSD over other stablecoins, with much of its trading pairs denominated in BUSD. Again, Binance reserves held about 90% of the $16.1 billion BUSD market cap as of February 14. This amounts to 22% of Binance’s reserves.
Noting the likely market response to the asset, Binance CEO Changpeng Zhao has noted that Binance will switch away from BUSD as its main trading pair. CZ also noted that the exchange will continue to support BUSD in the nearest future.
With the end of Paxos’ partnership with Binance, Binance US customers will find it more difficult to access the exchange. This is even more so after NYFDS took over Signature Bank over the weekend. According to the NYFDS, the decision to close Signature Bank was made due to systemic risk concerns and to protect US citizens.
According to CZ, the firm will be reviewing its projects in jurisdictions like the US where it is facing regulatory uncertainty. This, he noted is to ensure ‘users are insulated from any undue harm.”