Binance is set to discontinue its borrowing and lending services associated with its native stablecoin, Binance USD (BUSD), by the deadline of 25 October.
This move is part of a broader initiative aimed at gradually phasing out all BUSD-related offerings, with a targeted completion date set for 2024.
Notably, this decision aligns with the actions taken by New York-based fintech firm Paxos, which had previously signalled its intent to sever ties with Binance due to ongoing legal disputes with the United States (US) Securities and Exchange Commission (SEC).
Paxos had also outlined its forthcoming plans to cease the redemption of BUSD to US currency and Treasuries, with a cutoff date slated for February 2024.
Additionally, Paxos had temporarily halted the issuance of new BUSD tokens.
According to an official announcement made on 3 October, Binance is committed to a seamless and efficient closure process for all outstanding BUSD loan and collateral positions within the remaining timeframe of this month.
Importantly, while the lending and borrowing of BUSD will no longer be facilitated, users will still have the opportunity to engage in these activities using other stablecoins such as Tether, Dai, TrueUSD (TUSD), and USD Coin on the Binance platform.
It is noteworthy that prior to this termination announcement, BUSD had established itself as one of the leading stablecoins in the market, reaching a market capitalisation of $23 billion in November 2022.
However, its market cap has since receded, currently standing at $2.25 billion at the time of writing.
The winding down of BUSD and its associated services has been conducted in a phased approach.
In the preceding month, Binance suspended BUSD withdrawals on select blockchains, including BNB Chain, Avalanche, Polygon, Tron, and Optimism, while retaining the functionality on the Ethereum network.
BUSD deposits, on the other hand, remain open across all blockchain networks, and Binance urges users to consider converting their BUSD holdings into fiat currency or alternative cryptocurrencies in preparation for the forthcoming changes.
Binance Faces Pressure From All Sides
Binance and its CEO, Changpeng Zhao (CZ), also have found themselves embroiled in yet another Class Action lawsuit.
The lawsuit, filed in the US District for the Northern District of California in recent days, alleges that Binance played a significant role in the downfall of its formidable rival, FTX Derivatives Exchange, through tactics of unfair competition and market manipulation.
Nir Lahav, the plaintiff in this legal battle, contends that Binance violated not only the US Securities Exchange Act but also California’s Unfair Competition Law.
The saga began back in 2019 when Binance made substantial investments in FTX Tokens (FTT), acquiring around 5% of the total supply.
Fast forward to 6 November, 2022, when CZ, revealed in a tweet, his firm’s intention to divest its remaining FTT holdings, citing a cryptic “recent revelation.”
This announcement triggered a chain reaction, causing a substantial drop in the value of FTT in just a matter of hours.
The ripple effect was palpable, with many FTX users growing increasingly apprehensive about the fate of the exchange, prompting them to liquidate their positions.
The mass exodus from FTX set off a domino effect, leading to a chaotic situation within the exchange.
In a matter of days, the once-mighty FTX found itself in a state of implosion.
Adding to the intrigue, Binance made an initially promising but ultimately misleading statement about its intention to acquire FTX, seemingly as a lifeline for the beleaguered exchange.
However, Binance soon reneged on the acquisition deal, leaving the cryptocurrency community in a state of confusion.
The recent lawsuit has also unearthed a startling revelation: Binance had, in fact, sold 23 million FTT tokens worth a staggering $530 million just one day before CZ’s market-moving tweet became public knowledge.
This revelation bolsters the claim in the lawsuit that CZ’s tweet was a deliberate ploy to manipulate the market, thereby making him accountable for the losses suffered by the plaintiff.