Binance, the world’s largest cryptocurrency exchange, is exploring alternative stablecoins as a replacement for its doomed namesake Binance USD (BUSD), which was effectively cancelled by U.S. regulators. Despite being the seventh-most-valuable cryptocurrency with a market capitalization of $13.5 billion, the BUSD coin was ordered to be halted by the New York Department of Financial Services, citing concerns with due-diligence checks and periodic risk assessments.
Pivot Away From USD
Binance’s chief strategy officer, Patrick Hillmann, has suggested that the company is considering alternative formats, pegs, and partners to find a suitable replacement for the BUSD coin, which may not necessarily be dollar-based. Binance CEO Changpeng Zhao has also confirmed on Twitter that the company is exploring issuers and non-USD based stablecoins as potential replacements.
The idea of a pivot away from USD-based stablecoins may prove difficult given that nearly all prominent stablecoins are pegged to the U.S. dollar. However, there is an opportunity for non-USD stablecoins, particularly in Europe and the Middle East, as there are currently no dominant non-dollar fiat-backed stablecoins. The largest non-dollar fiat-backed stablecoin is euro tether, with a market capitalization of just $219 million.
Overcoming Regulatory Hurdles For non-USD Stablecoins
The situation presents an opportunity for stablecoin issuers to gain a foothold, as Kevin Zhang, the co-founder of DFX Finance, suggests. However, regulations continue to be a challenge for non-USD stablecoins to become prevalent. Stablecoin issuers are looking for ways to properly get regulated without making numerous assumptions and spending huge amounts of money on lawyers to provide opinions.
The regulatory issues facing Binance have caught the company by surprise, and the lack of notice has left the company scrambling to determine how to reimburse users of the BUSD coin. Hillman has indicated that BUSD’s days are numbered, and Binance-peg BUSD is also likely to wind down, given the impending regulatory challenges.
Binance appears to be losing its footing in the United States as regulators are clamping down on cryptocurrencies. The company’s U.S.-based banking partner, Signature Bank, recently announced that it would no longer process dollar-denominated transactions for individuals of less than $100,000. Hillman also confirmed to Forbes that the exchange does not currently have a U.S. banking partner.