BUSD Drama Sets Stage for Stablecoin Market Reshuffling

• Paxos, the issuer of Binance USD (BUSD) stablecoin, has burned more than $700 million of BUSD tokens since Monday when it announced to stop issuing the cryptocurrency amid mounting regulatory pressure.
• The uncertain future for embattled BUSD is stirring discord in the dollar-pegged crypto markets that one analyst says could accelerate into a dramatic reshuffling of the sector’s big winners and losers.
• Outbound transfers of coins such as USDC and USDT on the Ethereum blockchain have outpaced deposits for nine consecutive days, according to data from Nansen.

Regulatory Pressure Causes Burn of BUSD Tokens

On Monday, Paxos, issuer of the $16 billion Binance USD (BUSD) stablecoin, announced they would cease minting new tranches of their cryptocurrency due to mounting regulatory pressure. Blockchain data shows that since then, Paxos has already burned more than $700 million worth of BUSD tokens. Jesse Austin Campbell, Former Paxos Head of Portfolio Management and Columbia Business School Adjunct Professor discussed his outlook for the stablecoin market and crypto regulation.

Impact on Dollar-Pegged Crypto Markets

The uncertain future for embattled stablecoin Binance USD (BUSD) is stirring discord in the dollar-pegged crypto markets that one analyst says could accelerate into a dramatic reshuffling of the sector’s big winners and losers. With regulators this week forcing Paxos to stop issuing new coins, there is an opening for Circle’s USDC and Tether’s USDT to take advantage with market makers potentially favoring these coins over BUSD.

Outbound Transfers Outpacing Deposits

Traders continue to move stablecoins off centralized exchanges as outbound transfers have outpaced deposits in Ethereum blockchain based coins such as USDC and USDT for 9 consecutive days according to data from Nansen. This suggests traders are increasingly looking towards DeFi products instead as wallets associated with decentralized exchanges show large inflows during that same timeframe according to Messari researcher Ryan Watkins.

Potential Revamping Ahead?

Kaiko researcher Conor Ryder predicts that Tether’s USDT will likely be the short-term winner in this situation as it becomes favored by market makers over BUSD. However if traders decide against using centralized exchanges altogether then we could see a revamping of who’s winning in crypto’s dollar-pegged token markets with more attention being paid towards DeFi projects.