If you’ve been following the crypto agenda on Twitter since Sunday, you’ve probably read about the ramifications of US regulators’ recent action against BUSD, printed by Paxos. Concerns are growing in the new week and data shows that more and more investors are migrating to alternative stablecoins. Here is the latest situation in the altcoin market…
Altcoin investors migrate to alternatives to ‘assurance’
Paxos, the company authorized to issue BUSD, had to stop issuing new tokens at the order of the New York Department of Financial Services (NYDFS). cryptocoin.comAfter this news, we mentioned that on Monday, February 13, Binance’s stablecoin, BUSD, lost its price stability.
BUSD is a Binance-branded stablecoin issued and managed by Paxos. Restrictive decisions from US regulators have led altcoin investors to alternative stablecoins. The data so far shows that investors are switching from USDC and DAI to Tether (USDT), along with BUSD. Meanwhile, BUSD moved away from the top 5 according to market value.
BUSD, USDC and DAI exits move to Tether (USDT)
At the time of writing, BUSD accounted for 81% of the total liquidity of $12.81 million in the busdv2 liquidity pool on decentralized exchange Curve, with other components of the pool DAI, USDC and USDT making up the remainder.
BUSD’s dominance has increased from 69% since the beginning of Monday. In contrast, Tether’s presence has dropped to 3%, the lowest level in the pool, according to data from analytics tool Chaineye and Curve, showing USDT’s growing preference over BUSD and other centralized stablecoins following regulatory action.
“Investors are avoiding BUSD even though Paxos has given all assurance that the issuance program is fully supported and will be liquidated on a regular basis,” said Ilan Solot of London-based Marex Solutions.
Paxos will stop printing BUSD from February 21
Earlier on Sunday, the US Securities and Exchange Commission (SEC) told Paxos it plans to sue the company for violating investor protection laws. Also, on Monday, the New York Department of Financial Services ordered Paxos to stop issuing new tokens. In response, Paxos said it would stop issuing new tokens and process redemptions until at least 2024.
The real question with all of this is whether or not Circle gets the same treatment as Paxos, this will determine the impact. I don't know the answer but will be watching closely.
— Hal Press (@NorthRockLP) February 13, 2023
Meanwhile, Paxos announced on February 13 that it will stop printing BUSD from February 21:
Paxos, regulated by NYDFS, will continue to coordinate closely with the institution and will terminate the issuance of BUSD from February 21… Existing BUSDs will be both protected and repaid on a 1-to-1 basis until February 2024 at the earliest.
BUSD move also affects other altcoin projects
While the regulatory action is specific to BUSD, market participants have expressed concerns that Circle’s USDC may be about to face off heatedly, as evidenced by the Twitter comments and the imbalance in Curve’s 3 pools of USDT, USDC and DAI. Tether’s percentage share in 3pool fell from 24% to 17.5% in two days, last reaching the level before Terra’s collapse in May 2022. In contrast, USDC’s share increased from 38% to 41%. According to data from Dune Analytics, DAI’s share increased slightly to 40%.
It might come as a surprise that investors turned to Tether, and Tether has been criticized for being unregulated and not transparent about its reserves. A New York Judge on Friday rejected an attempt by cryptocurrency exchange Bitfinex and stablecoin issuer Tether to block a request for information on financial reserves backing USDT.
