The market cap of Paxos-issued Binance USD has dropped by nearly $2 billion since New York’s financial regulator on Monday ordered its creator, Paxos, to stop issuing the dollar-pegged coin.
After sporting a market cap of about $16.15 billion on Monday morning, the coin has dropped more than 9% to $14.6 billion on Wednesday, according to CoinGecko data. It’s down about 5% in the last 24 hours.
Paxos just burned 700m $BUSD off of its market cap. pic.twitter.com/U6sPgD1Lef
— cryptobtc (@crypto___btc) February 14, 2023
Paxos said it will stop issuing new BUSD tokens on Feb. 21 and that the tokens will be redeemable for U.S. dollars or Paxos’ own stablecoin, Pax Dollar, until at least February 2024.
That hasn’t stopped spooked investors from selling their holdings.
Following the announcement, the world’s largest crypto exchange, Binance, which licensed its name to the token, saw outflows of $2.7 billion over 24 hours. Inflows to the exchange over the same period resulted in a net outflow of $788.5 million, according to Nansen data. It wasn't clear how much of the outflows were specifically BUSD redemptions.
Binance CEO Changpeng "CZ" Zhao tweeted on Tuesday that the market cap of the third-most-popular stablecoin will “only decrease over time.”
For its part, Paxos has burned—or removed from circulation—at least $380 million of the tokens since Monday, according to PeckShieldAlert.
CZ has tried to distance himself from the token since Monday's news. On a Twitter Spaces on Tuesday, the Binance CEO reiterated that the stablecoin that bears the Binance name is not issued by Binance and is “...not something that we created.”
Still, Binance is a major holder of the stablecoin, with about $13.4 billion in holdings, which make up about 22% of the $60 billion in assets in its reserves, CoinDesk reported, citing Nansen data.
After the Monday news, CZ said his company will look to work with other stablecoin issuers and that the crypto industry will likely shy away from using dollar-pegged stablecoins because of the regulator’s decision.
The New York Department of Financial Services’s action against Paxos, along with a possible impending lawsuit from the Securities and Exchange Commission, has boosted the most popular stablecoin, Tether’s USDT.
The stablecoin saw an increase of more than 1.3% in its market cap since Monday and had a market cap of about $69.3 billion as of Wednesday, according to CoinGecko.
The BUSD news has been less positive for competing stablecoin USDC, which saw a half-a-percent increase since Monday boost its market cap to $41.2 billion as of Wednesday, according to CoinGecko.
But questions still remain about whether Circle, which issues USDC, will face any enforcement action from the SEC, because like Paxos it is a U.S.-based stablecoin issuer.
Rumors circulated earlier this week that the company had been issued a Wells Notice, or warning of possible enforcement action by the SEC, like Paxos had, but one of the company’s executives said that was not the case.
