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Dollar-pegged stablecoin Binance USD (BUSD) is currently ranked fourth by market capitalization among other stablecoins, after dropping more than $1 billion in the past 30 days, according to data from CoinMarketCap.
At the time of writing, BUSD has a market capitalization of $4.30 billion, down 29% from $5.54 billion on May 18. The stablecoin has been on a downward trend since last December, when its market capitalization topped $23 billion.
The decline in BUSD’s market cap is happening in parallel with the main events around Binance following the massive crash of FTX in November 2022. Last December, a report that Binance would be targeted by the US Department of Justice resulted in a net withdrawal of $3.6 billion within seven days. The exchange has redeemed large amounts of BUSD from market makers, including over $245 million from Jump Finance.
A partnership between Binance and Paxos Trust created the BUSD stablecoin in September 2019. Paxos releases and owns the product, while Binance licenses its brand. For Paxos, the partnership has brought new challenges. In February, the company reportedly received a Wells notice from the US Securities and Exchange Commission claiming that Binance USD is an unregistered security.
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The investigation resulted in the New York City Department of Financial Services (NYDFS) ordering Paxos to stop issuing BUSD. Combined, these episodes significantly reduced BUSD’s market share, from $15.88 billion on February 12 to $8.38 billion on March 13.
The most recent blow came with the SEC lawsuit against Binance on June 5 for allegedly offering unregistered securities. The US regulator has filed 13 charges against the exchange, including unregistered offerings and sales of BNB and BUSD tokens.
The market dominance of USD-pegged stablecoins has seen some changes over the past year, with Tether (USDT) returning to its all-time high while most stablecoins are declining.
Circle’s USD Coin (USDC) market share decreased from 34.88% in May 2022 to 23.05% in May 2023. The market share of BUSD over the same period fell from 11.68% to 4.18%, while the share of Dai (DAI) in the cryptocurrency market was 3.66% compared to 4.05% in May 2022.
On the other hand, USDT Tether is gaining momentum. The dominance of the stablecoin in the market in May was 65.89% compared to 47.04% a year ago. Its market capitalization has risen to $83.1 billion while USDC’s market capitalization has fallen from a peak of $55 billion to $29 billion.