Following regulatory issues, Binance switches to the FDUSD stablecoin and discontinues support for the BUSD. Photograph from Adobe Stock by Maurice Norman.

Leading cryptocurrency exchange Binance declared in a blog post today that it will stop supporting its stablecoin, Binance USD (BUSD), on December 15. The action was taken in response to a directive from authorities earlier this year for BUSD issuer Paxos to stop minting the stablecoin.

After December 31, Binance will automatically convert any remaining BUSD balances to First Digital USD (FDUSD) stablecoin to facilitate the shift away from BUSD. Before the December 15 deadline, users are urged to convert or withdraw their BUSD holdings.

Background on BUSD and Regulatory Action

BUSD is a stablecoin based on the US dollar that was introduced in 2019. It is a well-liked stablecoin alternative on Binance’s exchange, having been supported by the exchange and issued by Paxos Trust Company.

However, citing worries over its reserves, the New York Department of Financial Services (NYDFS) ordered Paxos to cease minting new BUSD in February 2023. Back in August, Binance declared that it will “gradually” stop supporting BUSD due to the regulatory crackdown.

Although existing BUSD can be redeemed until February 2024, Binance has established timelines in December for stopping trading and removing BUSD from its platform.

The withdrawal entails stopping deposits on different networks and eliminating BUSD trading pairs. Aside from that, Binance will stop accepting BUSD withdrawals on December 31 at 3:00 AM UTC. Any amounts in BUSD that are still outstanding will thereafter be immediately changed to FDUSD.

Transition to FDUSD

Earlier this year, First Digital Limited, a financial company with its headquarters in Hong Kong, released FDUSD through FD121 Limited.

In an effort to facilitate the switch, Binance has extended the period for the 1:1 conversion of BUSD to FDUSD until December 31. Phased withdrawal of BUSD pair trading will occur on the exchange prior to the December 15 deadline.

After that date, customers will have a brief window of time to remove their BUSD from Binance and transfer it to other wallets before Binance automatically converts remaining BUSD holdings to FDUSD.

The BUSD phase-out is a component of Binance’s evolving strategy to comply with international regulations. Richard Teng, the recently recruited CEO, declared his goal to fully comply with all regulatory requirements for Binance.

Teng took over as CEO of Binance’s primary company last week, succeeding founder Changpeng “CZ” Zhao, who resigned and entered a guilty plea for breaking criminal U.S. anti-money laundering regulations.

Binance aspires to move past its regulatory issues and regain confidence in important areas like the US.

Closing BUSD support is a reflection of Binance’s changing position in response to increasing pressure from international regulators. But the exchange refrained from instantly changing all BUSD balances to FDUSD.

Rather than taking over, Binance is allowing users to autonomously manage their stablecoin holdings. The gradual withdrawal of BUSD implies that Binance wants to minimize disturbance in order to retain its massive user base.