Binance-branded crypto token hit by $6 billion outflow after US crackdown

Investors have withdrawn more than $6 billion from a Binance-branded digital token over the past month, a sign that a recent US regulator crackdown on digital assets is putting pressure on the world’s largest crypto exchange.

New York’s financial regulator halted the re-issuance of the stablecoin, known as BUSD, last month, citing “several unresolved issues” related to Binance’s relationship with Paxos, the company responsible for minting the dollar-pegged token is.

Since then, holders have rushed to withdraw their cash, causing the BUSD in circulation to drop by more than a third, according to data from blockchain analytics platform Nansen.

Analysts said the outflow could weigh on Binance’s financial performance.

“This will likely hurt Binance’s bottom line as BUSD is a significant part of the business,” said Ilan Solot, co-head of digital assets at Marex Solutions.

The outflows come as US authorities step up their scrutiny of the crypto industry following last year’s unprecedented market crash and a series of scandals culminating in the bankruptcy of rival exchange FTX in November. Their targets include stablecoins, which play a crucial role in crypto trading, allowing investors to swap between different digital tokens without withdrawing their cash 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, CEO Changpeng Zhao said BUSD has never been a “big deal” for the exchange, adding that Binance intends to support as many other stablecoins as possible.

Despite this, BUSD accounted for about a fifth of Binance’s trading volume over the past year, rising as much as 40 percent in December, according to data from CryptoCompare.

Bar chart of BUSD token net flows on Binance (Mn) showing that BUSD token net flows on Binance have been trending down since New York regulators cracked down on the token

Binance said last year that the vast majority of its revenue comes from trading fees. However, over the past year it has waived fees for trading BUSD against some digital tokens to increase market share.

“If Binance does in fact generate 90 percent of its revenue from transaction fees, then it’s likely that a reduction in overall volume will weigh somewhat on the exchange’s revenue,” said David Moreno Darocas, head of research at data provider CryptoCompare.

Line chart of BUSD Market Share (%) showing that BUSD's share of the stablecoin market has fallen off a cliff over the past few weeks

This week, US-listed exchange Coinbase also announced that it would delist BUSD because the dollar-pegged token “no longer meets our listing standards.”

Binance’s BUSD woes come as the world’s largest crypto exchange comes under scrutiny from American regulators as part of a broader crackdown on digital assets in the United States.

Earlier this month, Zhao said Binance intends to withdraw potential investments in the US, an announcement that followed the Securities and Exchange Commission launching a series of enforcement actions against key crypto companies.

The SEC also recently rejected Binance US’ proposed $1 billion acquisition of the assets of bankrupt crypto lender Voyager Digital, warning that some of the bailout could violate securities laws. Binance-branded crypto token hit by $6 billion outflow after US crackdown

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