Binance, the largest cryptocurrency exchange by trading volume, has announced that it is removing support for three major stablecoins including Circle’s USDC, Pax Dollar (USDP), and TrueUSD (TUSD) on all its products.
Per a notice to users, Binance plans to convert any existing user balances and new deposits of these stablecoins to its own stablecoin, Binance USD (BUSD). The exchange is introducing a new feature called BUSD Auto-conversion that will automatically convert users’ balances of the named stablecoins to BUSD on a 1:1 basis with effect from September 29, 2022.
After the conversion, Binance users will only be able to use a “consolidated” BUSD balance that reflects their holdings of the stablecoins across all products including spot, margin, and futures markets, as well as liquid swap, convert, crypto loans, Binance Pay, and Binance Giftcards.
For the spot, margin, and futures markets, Binance is removing all trading pairs of the three stablecoins and closing all open trades. However, the notice states that the stablecoins can still be withdrawn and deposited on the exchange and that users who do not wish to wait for the automatic conversion can perform it manually.
What is Binance’s motive for the move?
The announcement has been met with a mix of reactions from the crypto community. Some observers have decried the move saying that it is an overt power grab intended to make BUSD prosper.
While this claim eyes USDC, which is the second biggest stablecoins by market cap, as the target of Binance’s schemings, it has been debunked by Jeremy Allaire, the CEO of Circle. In a tweet, Allaire stated that the converged dollar books are a good thing and have increased USDC’s utility.
He was responding to an analysis put forth by Evgeny Gaevoy, the CEO of Wintermute, who held that removing the stablecoin pairs is a good thing as it makes the job of market makers easy by ensuring liquidity is not split between multiple stablecoins. He adds that the move is also a big step to making the often criticized largest stablecoin Tether (USDT) lose ground.
For its part, Binance maintains that the move is “in order to enhance liquidity and capital-efficiency for users.” Binance CEO Changpeng Zhao (CZ) added in a tweet that users will stand to benefit the most as the merging of the balances would mean that Binance will offer the best prices and lowest slippage.
Meanwhile, the announcement is coming after Binance also said it would temporarily suspend deposits and withdrawals of Ether (ETH) and Wrapped Ether (WETH) on selected networks until after the Ethereum merge.
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