What it means: A stablecoin is a type of cryptocurrency whose value is pegged to another reference asset, mostly a fiat currency. Customers generally use these assets to trade with different cryptocurrencies without converting their funds back into fiat currencies. Relevance: The sharp decline in BUSD's market cap followed a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) on June 5 against Binance, the largest crypto exchange by trading volume, over alleged U.S. law violations. In the complaint, the SEC directed many allegations against Binance, including mishandling customer funds, misleading investors and regulators, violating securities laws, conflicts of interest, lack of disclosure, and wash trading. At the time, Binance defined the complaint as disappointing, saying they were intent on defending the platform vigorously. The legal action caused a drop in the market caps of Binance's tokens, including BUSD and Binance Coin (BNB). Brands that should care: BUSD launched through a partnership between Binance and the stablecoin issuer Paxos in September 2019. However, the issuance of the token brought new legal challenges for Paxos, too. The firm faced several legal motions from U.S. regulators, including the SEC and the New York Department of Financial Services (NYDFS), over the years. |
What the numbers say: Crypto exchange Binance's stablecoin Binance USD (BUSD) has retreated to fourth place in the ranks of top stablecoins by market cap after holding the No. 3 spot for months. Over the last month, the popular stablecoin's market cap declined by nearly 30%. Most recently, that figure fell to around $4.3B from the $5.1B at the beginning of June, with a decrease of almost $1B within just two weeks.