Large amounts of Binance stablecoin BUSD are being destroyed

The past few days have been hectic for Binance and its stablecoin BUSD. The issuer of BUSD, the company Paxos, is accused by the Security and Exchange Commission (SEC). The stablecoin is an unregistered security, according to the SEC, which Paxos denies. Users seem to be withdrawing their tokens from Binance en masse in response to the fuss. On Tuesday, nearly $1 billion was withdrawn from the platform. This is according to dates from the analytics company PeckShield.

Funds are ‘SAFU’

The bank run reminiscent of the FTX fiasco. The exchange collapsed in November after users massively withdrew their funds from the exchange. However, according to Binance, no one needs to worry. According to the exchange, all assets are safe and backed one to one by reserves.

Nevertheless, this one is hefty outflow of assets no small matter. According to dates from the analytics company Dune Analytics, it is the largest outflow since December 17. Binance itself believes that it was able to process the withdrawals “very easily”. The exchange says it is prepared for such situations and has reserves of no less than $ 60 billion.

Binance ‘burns’ BUSD

A large part of these reserves is in BUSD, Binance’s own stablecoin. $14.4 billion in BUSD to be exact. Paxos and Binance have stopped issuing new BUSD in response to the SEC’s allegations. They also started it burn, or withdraw from circulation, of BUSD. On Tuesday, nearly $350 million in BUSD was “destroyed” in this manner within 24 hours.

You may be thinking, ‘what exactly is crypto burning?’ You can best compare it to burning a pile of cash. But because crypto is digital, this is not possible. In practice, tokens are sent to an inaccessible address. Then no one can withdraw it, not even Paxos or Binance. The tokens thus disappear permanently from circulation.

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According to some, the burning of the BUSD is a kind of admission of guilt by Paxos. However, the company has indicated that it disagrees with the SEC’s allegations, and will vigorously fight them should it come to that.

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