Binance Ditching USDT For TrueUSD: Smarter Stablecoin Solution?

Key Points:

• Binance has reportedly turned to alternative stablecoins following regulatory action from the United States Securities and Exchange Commission (SEC) against its native stablecoin, Binance USD (BUSD).
• Binance is now reportedly looking to onboard TrueUSD (TUSD) and is also considering support for a few decentralized stablecoins.
• Binance recently announced support for Liquity (LQTY), a decentralized borrowing protocol, and launched TrueFi (TRU) perpetual contracts, the native token of TrueFi for uncollateralized lending.

Binance has reportedly turned to alternative stablecoins following regulatory action from the United States Securities and Exchange Commission (SEC) against its native stablecoin, Binance USD (BUSD). The SEC had issued a Wells notice alleging that BUSD violated U.S. securities law.

As a result of the SEC’s notice, the New York Department of Financial Services (NYDFS) asked the issuer of BUSD, Paxos Trust, to stop minting new BUSD altogether. This ban on minting BUSD has forced Binance to seek out alternative methods to meet its stablecoin needs.

According to on-chain data, BNB is now reportedly looking to onboard TrueUSD (TUSD) and is also considering support for a few decentralized stablecoins. In fact, the exchange has already minted 180 million TUSD from Feb. 16 to Feb. 24, demonstrating its efforts to meet its stablecoin needs despite regulatory challenges.

TrustToken, the operator of TUSD, a US dollar-pegged stablecoin, has had a partnership with BNB since June 2019, enabling Binance to purchase TUSD without fees and redeem it for fiat currency. However, Binance auto-liquidated TUSD to BUSD to increase its market share in September 2022, but following the ban on BUSD, Binance has started to mint new TUSD to address its stablecoin requirements.

Changpeng Zhao stated that the exchange would explore other options to diversify its stablecoin away from BUSD following regulatory action. BNB recently announced support for Liquity (LQTY), a decentralized borrowing protocol, and launched TrueFi (TRU) perpetual contracts, the native token of TrueFi for uncollateralized lending. Following the listing of Liquity and TrueFi, both tokens surged 200% in the last month. Binance did not respond to Cointelegraph’s request for comment on its interest in decentralized stablecoins.

Decentralized stablecoins, such as TerraUSD (UST), became popular with the emergence of Terra’s native stablecoin. However, after the collapse of the Terra ecosystem in May 2022, market analysts’ views on the fledgling stablecoin concept shifted quickly. The Office of the Comptroller of the Currency cited the depeg and collapse of the UST algorithmic stablecoin as an example of the “run risk” associated with stablecoins. Asset-backed stablecoins also experienced minor depeg events as a result.

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