Binance Seeks New Stablecoins Amid Regulatory Pressure
Binance, the world’s largest cryptocurrency exchange by trading volume, is looking for alternatives to its dollar-backed stablecoin BUSD after facing regulatory scrutiny from the U.S. authorities.
Stablecoins are digital tokens that are pegged to a fiat currency or another asset to maintain a stable value. They are widely used in crypto markets as a medium of exchange, a store of value, and a hedge against volatility.
BUSD is one of the most popular stablecoins in the crypto space, with a market value of over $16 billion as of February 2023. However, it is also under investigation by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for possible violations of securities and commodities laws.
According to Forbes1, Binance is exploring other options for creating non-dollar stablecoins that can appeal to global users and regulators. The exchange has partnered with several projects that aim to provide stablecoins backed by other currencies or assets, such as euros, pounds, gold, or even carbon credits.
One of these projects is DFX Finance2, a decentralized finance protocol that offers non-U.S. dollar stablecoins with low fees and high interest rates. DFX Finance cofounder Kevin Zhang said that regulations are one of the main challenges for non-USD stablecoins.
“One of the many reasons it has taken so long for non-USD stablecoins to become prevalent is regulations,” Zhang said1. “There are different legal frameworks across different jurisdictions that make it difficult to launch and operate these stablecoins.”
Zhang added that DFX Finance aims to comply with local regulations and work with licensed custodians and issuers to ensure transparency and security for its users.
Another project that Binance has invested in is Paxos3, a regulated trust company that offers several stablecoins backed by dollars, euros, gold, and other assets. Paxos also provides infrastructure for other crypto platforms such as PayPal and Meta.
Paxos CEO Charles Cascarilla said that stablecoins are essential for the future of capital markets because they enable faster, cheaper, and more efficient transactions across borders.
“Stablecoins are digital representations of all kinds of objects and their associated value,” Cascarilla said3. “They allow issuance and transfer of ownership without the need for paper documents.”
Binance’s move to diversify its stablecoin offerings comes amid growing competition from other crypto exchanges such as Coinbase COIN -0.1% , Kraken KRAKEN -0.2% , FTX FTX -0.3% , which also offer their own branded stablecoins or support various third-party ones.
As more countries adopt digital currencies or regulate crypto activities, Binance may face more challenges in maintaining its dominance in the global crypto market.
