Binance conversions will lead to more USDC flowing into the exchange: Circle CEO

Quick Take

  • Binance’s decision to convert USDC automatically to BUSD will be good for liquidity, Circle’s CEO said.
  • The move might increase safety for Binance customers, according to TUSD, one of the other three stablecoins Binance targeted.

Binance's move to automatically convert USDC and two other stablecoins may lead to more USDC flowing into the exchange, according to the CEO of Circle, which issues the coin. 

"Binance is trying to consolidate dollar liquidity w cash equivalent stables. That’s good for liquidity and market depth," said Circle CEO Jeremy Allaire on Twitter.

Binance said yesterday it will convert balances and new deposits of USD Coin (USDC), Pax Dollar (USDP) and TrueUSD (TUSD) to its own stablecoin (BUSD) in a 1:1 ratio. Users will still be able to withdraw these coins at the same ratio from BUSD even after the auto-conversion (scheduled for Sept. 26) happens.

"Binance is not ending support for USDC, and change will likely lead to more USDC flowing to Binance," Allaire said.

Having consolidated dollar books will make it easier for trading core markets to move USDC to and from Binance, Allaire said. "Given how limited BUSD usage is outside of Binance, this will likely benefit USDC usage as the preferred cross CEX and DEX stablecoin rail. Unless Binance can convince all their competitors to get behind BUSD."

Crypto exchange FTX effectively does the same thing, crediting USD, USDC, TUSD, USDP, BUSD and HUSD deposits with USD Stablecoins in a 1:1 ratio, Steven Zheng, from The Block Research's team, pointed out.

"Binance’s move helps consolidate liquidity of stablecoin trading pairs on its exchange," he said. "This is beneficial to both users as they won’t have to trade against fragmented stablecoin liquidity as well as Binance who can bring more activity and eyes to its BUSD stablecoin.”

TUSD said on Twitter it will cooperate with the Binance "ecosystem."

"Binance will maintain multi-chain $TUSD deposit and withdrawal support on their exchange for all the following token standards," TUSD said.

The move will ensure better safety for Binance customers, said Rich Teo, co-founder and CEO of Paxos Asia, the company that issued BUSD in partnership with Binance.

"Unlike competing stablecoins, BUSD is regulated by NYDFS (New York State Department of Financial Services) which sets rules and monitors compliance with those rules," Teo said. "ONLY regulated stablecoins do this, setting us apart from stablecoins issued by companies operating with Money Transmitter Licenses (MTLs) that have no oversight of reserves or governance."

BUSD is among 24 currencies in the NYDFS's green list, meaning that it can be used in the state by licensed entities without needing additional regulatory approval. Stablecoins issued by DFS-regulated entities that have been approved for issuance include Z.com USD (ZUSD), Pax Dollar (USDP) and Gemini Dollar (GUSD).

Teo also stressed that BUSD reserves are held by a bankruptcy remote trust offering "greater consumer protections" and "setting it apart from MTL-issued stablecoins which are held by corporations and exposed to losses and bankruptcy."

BUSD has the third largest market cap among stablecoins (which are pegged to a fiat currency like the dollar), after Tether (USDT) and USD Coin (USDC). 

 
 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Catarina is a reporter for The Block based in New York City. Before joining the team, she covered local news at Patch.com and at the New York Daily News. She started her career in Lisbon, Portugal, where she worked for publications such as Público and Sábado. She graduated from NYU with a MA in Journalism. Feel free to email any comments or tips to [email protected] or to reach out on Twitter (@catarinalsm).