In response to the U.S. Securities and Exchange Commission’s (SEC) regulatory action against its native stablecoin, Binance USD (BUSD), Binance has turned to a new set of stablecoins. After the SEC sent a Wells notice alleging that BUSD violates U.S. securities law, the New York Department of Financial Services (NYDFS) ordered the issuer Paxos Trust to cease minting new BUSD, leaving Binance with no alternative but to seek out other methods. According to on-chain data, the largest cryptocurrency exchange by trading volume has begun minting TrueUSD (TUSD) and adding support for a few decentralized stablecoins. Between February 16 and 24, Binance minted 180 million TUSD.
Binance and TrustToken, the operator behind U.S. dollar-pegged stablecoin TUSD, have partnered since June 2019, enabling Binance to purchase TUSD with zero fees and redeem it for fiat currency. Following this, in September 2022, Binance auto-liquidated TUSD to BUSD to increase its market share. However, due to a ban on BUSD, Binance has been compelled to mint new TUSD to meet its stablecoin requirements. This marks the full circle of the relationship between Binance and TrustToken.
Following the regulatory actions taken against its stablecoin, BUSD, Binance CEO Changpeng Zhao stated that the crypto exchange would explore other options to diversify. Shortly after, Binance announced support for Liquity (LQTY), a decentralized borrowing protocol, and unveiled TrueFi (TRU) perpetual contracts. TRU is the native token for TrueFi, a decentralized finance protocol for uncollateralized lending.
The listing of Liquity and TrueFi on Binance has been a major success, with the prices of both tokens rising by over 200% in the past month. The concept of decentralized stablecoins first gained traction with the introduction of TerraUSD (UST) from Terra.
Initially, market experts were optimistic about the potential of such stablecoins, however following the depeg and collapse of UST in May 2022 and further minor depeg events experienced by asset-backed stablecoins, opinions have shifted, and the Office of the Comptroller of the Currency have cautioned about the risks associated with stablecoins.
