• BUSD, the stablecoin of cryptocurrency exchange Binance, has been criticized due to reports showing insufficient backing of the coin.
• BUSD is pegged to the dollar, so the exchange must have a stockpile of U.S. dollars in a bank account. Regular updates are released detailing the amount of BUSD in circulation and the equivalent number of U.S. dollars kept in reserve.
• Recently, Binance disclosed that bugs in its system had resulted in at least $1 billion in under collateralization of its Binance Smart Chain BUSD supply, which was supposed to be backed one-to-one by the U.S. dollar.
The stablecoin of trading platform Binance, BUSD, has been under the spotlight recently due to reports showing insufficient backing of the coin. This stablecoin is pegged to the dollar, so the exchange must have a stockpile of U.S. dollars in a bank account in order to guarantee that one BUSD will always be worth one USD. To show users that there is a sufficient amount of U.S. dollars in reserve to back the whole value of BUSD in circulation, Binance releases regular updates detailing the amount of BUSD in circulation and the equivalent number of U.S. dollars kept in reserve.
However, unfortunately, recent revelations have cast doubt on the process. On 10 January, Binance disclosed that bugs in its system had resulted in at least $1 billion in under collateralization of its Binance Smart Chain BUSD supply, which was supposed to be backed one-to-one by the U.S. dollar. This had caused three significant deviations from its peg and had caused the market to be wary of the stability of the coin.
This is why Paxos, a New York-based financial technology startup, has stepped in to guarantee the full collateralization of BUSD on the Ethereum blockchain in U.S. dollars. This was achieved by the company giving the exchange a bank account where all the cash reserves are kept. This account is then audited regularly to ensure that the reserves are sufficient to back the BUSD supply, thus guaranteeing the stability of the coin.
Binance has also responded to the criticism by stating that it remains committed to ensuring the integrity and longevity of the BUSD peg. It has taken steps to enable the full collateralization of BUSD on its blockchains, and it is continuing to work on further improving its systems to ensure the stability of the coin.
Overall, the recent reports have caused some uncertainty in the market, but Binance has taken steps to ensure the stability of BUSD by working with Paxos and taking measures to ensure the full collateralization of the coin. As a result, the coin has been able to maintain its peg so far, and it is hoped that this will continue in the future.