Investors have withdrawn more than $6 billion from a Binance-branded digital token in the past month, a sign that a recent US regulatory crackdown on digital assets is putting pressure on the world’s largest crypto exchange.
New York’s financial regulator was suspended last month new show of the stablecoin, known as BUSD, citing “several unresolved issues” regarding Binance’s relationship with Paxos, the company responsible for minting the dollar-pegged token.
Since then, holders have been rushing to withdraw their money, causing the BUSD in circulation to plummet by more than a third, according to data from blockchain analytics platform Nansen.
Analysts said the exit could hurt Binance’s financial performance.
“This will likely hurt Binance’s bottom line as BUSD is an important part of the business,” said Ilan Solot, co-head of digital assets at Marex Solutions.
The exits come as US authorities intensify their examination of the crypto industry after last year’s unprecedented stock market crash and a series of scandals that culminated in the bankruptcy of rival exchange FTX in November. Among their targets are stablecoins, which play a crucial role in crypto trading, allowing investors to switch between different digital tokens without withdrawing their money in the form of fiat currency.
Following New York’s crackdown on BUSD, Binance said it expects BUSD trading volume “to shift to other stablecoin pairs over time.”
Earlier this month, Managing Director Changpeng Zhao said BUSD has never been a “big business” for the exchange, adding that Binance intends to support as many other stablecoins as possible. possible.
Even so, BUSD accounted for around a fifth of Binance’s trading volume last year, rising as high as 40% in December, according to data from CryptoCompare.
Binance said last year that the vast majority of its revenue comes from trading fees. However, last year he fee waived to exchange BUSD for certain digital tokens in an effort to increase their market share.
“If Binance actually generates 90% of its revenue from transaction fees, it’s likely that a reduction in overall volumes will put some pressure on the exchange’s revenue,” said David Moreno Darocas, head of research. at the data provider CryptoCompare.
This week, US-listed exchange Coinbase also said it would remove BUSD because the dollar-pegged token “no longer meets our listing standards.”
Binance’s BUSD issues come at a time when the world’s largest crypto exchange is under scrutiny from US regulators amid a broader pushback against digital assets in the US .
Earlier this month, Zhao said Binance intended to withdraw its potential investments in the United States, an announcement that followed the Securities and Exchange Commission’s launch of a series of enforcement actions against major companies. of cryptography.
The SEC also recently opposed Binance US’ proposed $1 billion acquisition of the assets of bankrupt crypto lender Voyager Digital, warning that part of the bailout could violate securities law.