Following the US regulatory crackdown against one of its rivals, BUSD, Stablecoin Tether’s flagship token USDT saw an incredible surge in market cap – from $68.47 billion on Tuesday to around $69.23 billion by Wednesday (15), according to CoinMarketCap data. This huge increase is almost equivalent to the decline observed for Binance-owned Paxos issued token BUSD, which plummeted from a market cap of $16.14 billion all the way down to just shy of 15$46 Billion!
Paxos Will Not Issue New BUSD Due to the Orders from New York Regulators
The New York Department of Financial Services issued orders for Paxos, the software of BUSD and USDT stablecoins, to cease issuing new tokens starting next week. Stablecoins are cryptocurrencies that maintain a fixed rate relative to USD; these coins are backed with multi-billion dollar reserves consisting primarily of cash and U.S.-backed promissory notes, which have been repackaged into cryptocurrency form.
It appears that traders seeking liquidity with stablecoins are opting for the tried and true Tether to avoid potential US regulatory actions, as BUSD’s losses imply. This is likely due to iFinex, the owner of Tether based in Hong Kong, whereas Paxos and Circle—which issues the second largest stablecoin USDC—are located on American soil. Data from DeFiLlama reveals that this has allowed Tether’s dominance over the market to rise up to 50.77%, while its entire market value comes out at $136.93 billion!
USDC Could Profit Quitely From These Developments
Ultimately, the USDC could benefit from the downfall of BUSD in the long run. CZ Zhao confirmed that his exchange will have to cease relying on BUSD due to its poor liquidity, potentially leaving room for USDC to prosper. In September 2022, deposits made into Binance were mostly converted from major stablecoins like USDC (not Tether‘s USDT) over to BUSD, which had an obvious effect on each coin’s worth.
On Tuesday, Circle’s Chief Strategy Officer Dante Disparte declared that their company has yet to be notified by the SEC in contrast to Paxos, who allegedly issued BUSD as an unregistered security.
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