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Binance To Convert Stablecoins To Own Binance USD

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Updated 7 Sep 2022

Key points:

  • Binance To Convert USD Coin, Pax Dollar And TrueUSD Into Binance USD
  • Move Seen As A Power Grab
  • Who Wins, Who Loses?

On Monday, the world’s largest cryptocurrency exchange, Binance, announced that it will automatically convert balances and any new deposits of the USD Coin (USDC), Pax Dollar (USDP) and True USD (TUSD) stablecoins, into Binance USD (BUSD), its own stablecoin. Although not unprecedented, this move has been seen by many in the industry as a power grab. But who benefits and losses from this development? We will look at all of the above in the post.

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Binance To Convert USD Coin, Pax Dollar And TrueUSD Into Binance USD

Binance is the biggest crypto exchange globally and as such, any moves it makes in the world of decentralised finance are closely scrutinised. So, when they announced on Monday a change in how it will treat certain stablecoins on its exchange it (USD Coin , Pax Dollar and TrueUSD ) certainly made some waves in the crypto market. In a statement, Binance stated,

“In order to enhance liquidity and capital-efficiency for users, Binance is introducing BUSD Auto- Conversion for users’ existing balances and new deposits of USDC, USDP and TUSD stablecoins at a 1:1 ratio. With effect from 2022-09-29 03:00 (UTC), users will trade with a consolidated BUSD balance on the Binance Platform that reflects their balances of these four stablecoins (BUSD, USDC, USDP and TUSD) post conversion.”

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Move Seen As A Power Grab

The move by Binance was not a surprise because it was unprecedented, but rather that it could be seen as anti-competitive, and given the cryptocurrency market is effectively a sector without regulators, there is no obvious way to challenge the move.

As Binance is already the largest global exchange, Clara Medalie, head of research at blockchain data firm Kaiko, highlighted that centralization around Binance is a significant biggest concern with this announcement. She stated,

“Auto-conversion ensures that BUSD usage will continue to grow,” adding “there is an argument that this is anti-competitive behaviour, and it should be up to the markets to decide which USD-stablecoin to use, rather than an exchange.”

Who Wins, Who Loses?

Clearly, this move will benefit Binance, as it cements their market share of the stablecoin market and reinforces the position of their own already popular stablecoin, BUSD. However, this stablecoin is already well established, BUSD is currently the third largest stablecoin by market capitalisation, so this cannot just be viewed as a development benefiting Binance.

USD Coin is the world’s second-largest stablecoin, behind leader Tether, and is issued by US firm Circle. The CEO of Circle, Jeremy Allaire, said in a tweet that “converged dollar books on Binance … is a good thing. USDC utility just increased.”