As the clock ticks towards February 2024, Binance is steering towards unfamiliar waters. The cryptocurrency exchange is not just ending its support for the Binance USD (BUSD) stablecoin, it is advocating for a transition to First Digital USD (FDUSD). This Hong Kong-based stablecoin, launched by First Digital Group, quickly became Binance’s beloved after debuting on the platform at the end of July.
In a statement released on August 31st, Binance encourages users to exchange or convert their BUSD to FDUSD. To make the offer more appealing, Binance has made BUSD to FDUSD conversions free and offers fee-free trading pairs for FDUSD with popular cryptocurrencies like Bitcoin and Ethereum.
Regulatory backdrop: pressure from the SEC and NYDFS
This move by Binance appears to be more than just a tactical shift. Ending support for BUSD is a clear response to mounting regulatory pressures since February 13th, when the U.S. Securities and Exchange Commission issued a Wells notice to Paxos, alleging that BUSD was an unregistered security. On the same day, the New York Department of Financial Services (NYDFS) ordered Paxos to cease minting BUSD. Binance’s decision aligns with Paxos’ previous announcement to halt redemptions of BUSD by February 2024.