Binance USD

Binance USD, which is also known as BUSD, is a U.S. dollar stablecoin issued by crypto exchange Binance and blockchain company Paxos Trust. Similar to rivals USDC and tether (USDT), the BUSD stablecoin attempts to maintain a price of one U.S. dollar at all times through its backing of fiat reserves.

Traders use stablecoins to keep their holdings at a steady value and on the blockchain without withdrawing crypto for fiat currencies. They are some of the largest and most traded crypto assets, and BUSD is one of the most popular.

BUSD is worth $1. After the stablecoin was launched in September 2019, its price hasn’t deviated by more than a few cents, other than during the March 2020 flash crash. When the global pandemic hit financial markets in 2020, BUSD reached a high of $1.11 on March 11 of that year and an all-time low of $0.88 less than 24 hours later.

Paxos handles its issuance. Whenever someone wants to redeem BUSD for cash, Paxos burns (destroys) BUSD and sends cash to the withdrawer’s bank account. And whenever someone wants to create BUSD with U.S. dollars, Paxos mints more USD in exchange for the dollars.

As such, there isn’t a cap on the total number of BUSD that can ever exist – its supply depends on how much money people have entrusted to Paxos. As of May 2022, BUSD was the fourth-largest stablecoin by market capitalization after tether, USDC and TerraUSD (UST).

BUSD is based on the Ethereum blockchain, and it also supports the Binance Chain’s BEP-2 standard. It can be minted by wiring money to Paxos, or by exchanging it with different fiat currencies and cryptocurrencies on exchanges like Binance.

While it bears Binance’s name and trades widely on that exchange, Paxos handles the issuance. Binance has often promoted the coin, for instance by scrapping trading fees for BUSD pairs, and neither Binance nor Paxos charges for purchases or redemptions.

Paxos keeps all of the fiat it receives in a trust, and then puts that money into U.S. bank accounts. Paxos claims to hold $1 for each BUSD it issues, meaning that the coins are issued at a 1:1 backing. Paxos publishes independent attestations from an auditor to verify that it holds the total supply of BUSD in bank accounts that are insured by the Federal Deposit Insurance Corp.

Paxos also invests some of the money in U.S. government debt. The attestation reports confirm that the money is held in bank accounts and that Paxos has the right to hold money in instruments that “generally include, but are not necessarily limited to U.S. dollars, U.S. Treasury backed Bills, Bonds and Notes.” It should be noted that the attestations aren’t the equivalent to an audit – they only attest that Paxos held the money at a certain moment in time.

Unlike decentralized (or algorithmic) stablecoins like UST and DAI, BUSD is entirely centralized. Paxos is run by CEO and co-founder Charles Cascarilla, and Binance is run by Changpeng Zhao, who is better known by his nickname, CZ.

BUSD is notable for being approved by the New York Department of Financial Services, a notoriously difficult regulator to work with. Only three other U.S. dollar stablecoins have received such approval: GUSD (from crypto exchange Gemini), Z.com USD (ZUSD) and the Pax Dollar (USDP) – another stablecoin issued by Paxos.