The world’s fifth largest stablecoin, Binance USD (BUSD) is officially dead. Binance announced it will “close all outstanding BUSD coin and mortgage positions on 25 October 2023.”*
This announcement came a little over a month after Binance announced it will end all BUSD services by 2024. BUSD became nonviable after the Paxos Trust company stopped supporting BUSD in February 2023. Paxos dropped Binance because the US Securities and Exchange Commission (SEC) is suing Binance over alleged violations of US regulations.
To elaborate, Binance USD’s only value was its ability to make payments in US dollars from Paxos Trust accounts. When Paxos pulled the plug, BUSD lost all its value.
Strangely, the 25 October announcement appears in Mandarin on Binance’s Chinese website. Consequently, I wonder if Binance will become a Chinese company. Perhaps Binance CEO Changpeng Zhao has made some sort of deal with the Chinese government or the People’s Bank of China (PBOC). Zhao was born in Jiangsu, although he holds Canadian citizenship.
Is Binance selling out to the People’s Bank of China?
The PBOC could fold Binance’s ecosystem into its Digital Yuan (ECNY) central bank digital currency (CBDC) scheme.
To explain, a CBDC is a cryptocurrency a central bank, like the PBOC, issues. Theoretically, a CBDC like ECNY has the same value and buying power as the paper fiat currency. Thus, an ECNY is worth one Chinese Yuan.
The PBOC claims the Digital Yuan will replace the US dollar, and stablecoins such as Tether (USDT). However, the e-CNY is not a stablecoin. To explain, stablecoins, such as Binance USD and Tether, contain a smart contract that makes payment in fiat currency such as US Dollars. In contrast, ECNY is worth one yuan.
Currently, ECNY’s value is dubious because the yuan’s value is falling. For example, a yuan was worth 14₵ USD on 6 October 2023.
Yuan use Growing
Conversely, yuan use in countries, such as Russia, Brazil, and Argentina, is rising because of the dollar’s high cost and idiotic US sanctions. Notably, the Bank of China made the first direct yuan investment in Argentina on 6 October 2023. In particular, the PBOC has gotten some governments and central banks to use yuan.
For example, Argentine Economy Minister Sergio Massa has negotiated a currency swap deal between the PBOC and the Central Bank of Argentina. Al Jazeera calls Massa’s deal a “yuan lifeline” that lets Argentine importers pay for Chinese goods in yuan.
Al Jazeera estimates the deal gives the Central Bank of Argentina a $5 billion to $10 billion yuan line of credit. Tellingly, the Central Bank of Argentina used $2.5 billion of that money in a debt payment to US based International Monetary Fund (IMF).
Why the PBOC could want Binance
However, individual investors and private business owners are skeptical of the yuan. Nervous Chinese exporters are using complicated currency swaps to avoid changing dollars to yuan, Reuters claims.
Hence, the PBOC will need ways to convince investors, speculators, bankers, merchants, and executives to use the yuan. Moreover, the PBOC will need to convince investors, speculators, and merchants to use Digital Yuan.
One way to promote Digital Yuan use to individuals is through the world’s largest cryptocurrency exchange (Binance). Binance is five times the size of the number two exchange America’s CoinBase (COIN). CoinMarketCap estimates Binance had a 24-Hour Trading Volume of $5.125 billion on 6 October 2023.
Moreover, Binance (BNB) was the fourth-largest cryptocurrency, with a $32.648 billion Market Capitalization and a $212.18 Coin Prince on 6 October 2023. Plus, Binance had a Circulating Supply of 153.846 billion BNB.
Binance (BNB) and the People’s Bank of China
Plus, many decentralized finance (DeFi) developers use Binance’s BNB Beacon Chain (BC) and BNB Smart Chain (BSC) blockchains. For example, the BEP-20 token standard extends the popular ERC-20 Ethereum token standard to the BNB Smart Chain.
Popular BEP-20 tokens include Binance (BNB), Binance USD (BUSD), PancakeSwap (CAKE), the Trust Wallet Token (TWT), SafeMoon (SAFEMOON), Cream (CREAM), and WazirX (WRX).
Linking Digital Yuan to Binance could legitimize ECNY with crypto geeks and speculators. This will take time, perhaps years.
PBOC leaders will not mind because Chinese officials like to play a long game. Hence, the PBOC could pump resources into Binance for years to promote ECNY.
Could Binance adopt the Digital Yuan?
Plus, I think Binance’s recent troubles with US regulators could legitimize it with some Chinese leaders. Moreover, PBOC officials could view Binance as an alternative to American blockchain technology. Perhaps as a Trojan horse to sneak ECNY into new countries and the cryptocurrency ecosystem.
Changpeng Zhao could go along with this because having an actual fiat currency accepted by central banks could add enormous value to Binance. Particularly, if more central banks follow the Central Bank of Argentina’s lead and adopt yuan in place of their worthless fiat currencies.
To explain, crypto geeks who will normally reject a CBDC could accept ECNY if it pops up as another offering on Binance’s exchange. Perhaps as a BEP-20 token. I think speculators will accept ECNY if they see people using it. I have no evidence the PBOC is helping Binance but I wonder about it.
What Value Does Binance USD (BUSD) offer?
Although, Binance USD (BUSD) is dying, Mr. Market is still buying it. For example, Binance USD was CoinMarketCap’s 29th largest cryptocurrency, with a $1 Coin Price on 6 October 2023.
Additionally, CoinMarketCap gave BUSD a $2.228 billion Market Capitalization, and a $549.583 million 24-Hour Market Volume on 6 October 2023. They base those numbers on a Total Supply of 227.589 billion BUSD.
Hence, people are still paying money for a stablecoin that is being shut down by its creator. Thus, the cryptocurrency Market is more insane than we thought. Smart speculators need to avoid the zombie Binance USD and purchase functioning stablecoins such as Tether (USDT) and USD Coin (USDC).
BUSD shows how dangerous stablecoins are. Smart speculators will examine Binance USD closely to see what is wrong with stablecoins.