Binance USD

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Discover Binance USD's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Binance USD?

Binance USD (BUSD) is a stablecoin pegged to the US dollar, issued by Paxos in partnership with Binance. It is a fiat-backed digital currency, meaning its value is directly tied to the US dollar on a 1:1 basis, ensuring stability and reliability. BUSD is built on the Ethereum blockchain as an ERC-20 token and is regulated by the New York State Department of Financial Services (NYDFS), making it a trusted and compliant stablecoin in the market.

How is Binance USD used?

Binance USD (BUSD) is a fiat-backed stablecoin that is used in various ways to facilitate transactions and mitigate the volatility of the cryptocurrency market. Here are some key use cases:

  1. Hedging Against Volatility: BUSD is used to hedge against the price fluctuations of other cryptocurrencies. Since it is pegged to the U.S. dollar, it provides a stable store of value, allowing users to protect their portfolios from market volatility.

  2. Digital Payments: BUSD is used for digital payments, ensuring that both the sender and the recipient are protected from price volatility. This makes it a reliable choice for transactions.

  3. Liquidity Provision and Yield Farming: BUSD is used in liquidity provision and yield farming, which involves providing liquidity to decentralized exchanges and earning interest on assets.

  1. Real-World Use Cases: BUSD is increasingly being used in real-world scenarios, such as booking hotel rooms using QR codes that allow users to pay with BUSD. This expands its use beyond traditional cryptocurrency transactions.

  2. Cross-Chain Compatibility: BUSD can be used on both the Ethereum and Binance Smart Chain blockchains, making it a versatile stablecoin. Users can convert their tokens between these chains using Binance's Convert feature.

These use cases highlight the versatility and stability of BUSD, making it a popular choice for those seeking to navigate the cryptocurrency market with reduced risk.

How do I store Binance USD?

To store Binance USD (BUSD) tokens, you can use a variety of wallets and methods. Here are some options:

  1. Ledger Wallet: Ledger offers a secure hardware wallet for storing BUSD tokens. You can purchase a Ledger Nano S Plus or Ledger Nano X, which are both compatible with BUSD. These wallets store your private keys offline, providing a high level of security against malicious attacks.

  2. MyEtherWallet: MyEtherWallet provides a user-friendly interface for storing, sending, and receiving BUSD tokens. It is a popular choice for managing BUSD assets.

  3. BitPay Wallet: BitPay offers a wallet that allows you to securely buy, store, swap, and spend BUSD tokens. You can download the BitPay App to manage your BUSD assets.

  1. Binance Wallet: You can also store your BUSD tokens directly on the Binance platform. After purchasing BUSD, you can store it in your Binance wallet or transfer it to a personal crypto wallet.

  2. Trust Wallet: Trust Wallet, supported by Binance, is another option for storing BUSD tokens. It supports millions of assets and blockchains, making it a versatile choice.

Before choosing a wallet, ensure it is compatible with BUSD and meets your security and usability requirements.

How to buy Binance USD?

To buy Binance USD (BUSD) tokens, you can follow these steps:

Buying on Centralized Exchanges (CEXs)
  1. Choose a Reliable Exchange: Select a trustworthy centralized exchange that supports BUSD purchases, such as Binance, BitPay, or KuCoin.
  2. Create an Account: Register on the exchange's website or mobile app, providing the required information and setting a secure password. Enable two-factor authentication (2FA) for added security.
  3. Verify Your Identity: Complete Know Your Customer (KYC) verification, which may require personal identification documents and varies based on your nationality and region.
  4. Add a Payment Method: Follow the exchange's instructions to add a credit/debit card, bank account, or other supported payment methods.
  5. Buy BUSD: Use fiat currency to buy BUSD directly, or first purchase a popular cryptocurrency like USDT and then exchange it for BUSD.
Buying on Decentralized Exchanges (DEXs)
  1. Get Ethereum (ETH): Buy ETH on a centralized exchange like Bit2Me or Binance.
  2. Set Up a MetaMask Wallet: Create a MetaMask wallet, which supports multiple blockchains and facilitates access to decentralized applications (DApps).
  3. Transfer ETH to MetaMask: Send your ETH from the centralized exchange to your MetaMask wallet.
  4. Connect to a DEX: Use MetaMask to connect to a decentralized exchange like PancakeSwap that supports BUSD.
  5. Swap ETH for BUSD: Select ETH as the payment and BUSD as the cryptocurrency to buy, then make the swap.
Additional Tips
  • Ensure you have a secure internet connection and valid payment methods.
  • Be cautious of potential frauds or phishing attacks when using DEXs.
  • Always check the exchange's fees, liquidity, and security before making a purchase.
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History of Binance USD

Binance USD (BUSD) is a USD-denominated stablecoin that was launched in 2019 as a joint venture between Binance, the world's largest cryptocurrency exchange by trading volume, and Paxos, a regulated blockchain infrastructure platform. The stablecoin is pegged to the value of the US dollar at a 1:1 ratio, ensuring that its market value remains stable and equivalent to one US dollar.

Launch and Early Growth

BUSD was officially launched on September 5, 2019, after receiving approval from the New York State Department of Financial Services (NYDFS). It became available for purchase with Paxos USD on September 12, 2019, and was listed on the Binance platform for trading against various cryptocurrencies, including Ripple (XRP), Bitcoin (BTC), and Binance Coin (BNB), on September 20, 2019.

In its early days, BUSD experienced rapid growth. By March 2020, it had already reached a market capitalization of $100 million. This growth continued, and by the beginning of 2021, its market capitalization had reached $1 billion. Over the next 20 months, it grew another 20 times, reaching a market capitalization of $20 billion.

Features and Use Cases

BUSD is designed to mitigate the risks associated with price volatility in the cryptocurrency market. It is fully backed by reserves held in dedicated omnibus accounts at insured US banks, in fiat cash, and/or US Treasury bills, including investments in repurchase agreements or money-market funds. This ensures that each BUSD token maintains its 1:1 parity with the US dollar.

The stablecoin is widely used for various purposes, including digital payments, liquidity provision, and yield farming. It is also used to hedge against crypto price fluctuations, providing a stable store of value for users. Additionally, BUSD supports non-fungible tokens (NFTs) through the Binance NFT project.

Regulatory Developments

In February 2023, BUSD faced regulatory challenges when the NYDFS ordered Paxos to stop issuing the stablecoin. This led to Binance being sued by the Commodity and Futures Trading Commission (CFTC) for allegedly offering unregistered crypto derivatives products. As a result, Binance began diversifying its stablecoin reserves away from BUSD, minting approximately $50 million worth of TrueUSD (TUSD).

Despite these challenges, BUSD remains a widely used and trusted stablecoin, with a strong presence on various exchanges and wallets. Its ability to maintain its 1:1 peg to the US dollar has made it a staple in the cryptocurrency industry.

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How Binance USD works

Binance USD (BUSD) is a stablecoin that is pegged to the value of the US dollar. It was launched jointly by Binance, a leading cryptocurrency exchange, and Paxos, a blockchain infrastructure platform. The key feature of BUSD is that it is fully backed by reserves held in either fiat cash in insured US banks or US Treasury bills, ensuring that its value remains stable and equivalent to one US dollar.

Issuance and Redemption

BUSD is issued by Paxos on the Ethereum blockchain, and it can be issued and redeemed without any extra fees. Additionally, Binance offers a wrapped BUSD token (Binance-Peg) on BNB Chain, which is not issued by Paxos and is not regulated by the New York State Department of Financial Services.

Functionality

BUSD operates as an ERC-20 token, allowing it to be stored in popular Ethereum wallets like MetaMask and Exodus. It also complies with the BEP-2 standard and can operate on the Binance Smart Chain. This dual functionality makes it a versatile stablecoin that can be used across different blockchain platforms.

Maintaining the Peg

To maintain the 1:1 peg with the US dollar, BUSD uses a deflationary mechanism. When BUSD is bought, a corresponding amount of US dollars is added to the Paxos treasury. Conversely, when BUSD is sold, the equivalent amount of US dollars is taken from the treasury, and the corresponding BUSD tokens are burned. This mechanism ensures that the value of BUSD remains stable and tied to the US dollar.

Security and Oversight

Paxos, the issuer of BUSD, follows strict regulatory guidelines set by the New York Department of Financial Services (NYDFS). This includes monthly audits of the bank reserves by an accredited accounting firm. Paxos also has the power to suspend the transfer, creation, or destruction of BUSD tokens in case of major security breaches, ensuring the integrity of the stablecoin.

Trading and Storage

BUSD can be traded on various cryptocurrency exchanges, including Binance, Kraken, and Coinbase. It can be stored in hardware wallets, exchange wallets, or popular Ethereum wallets like MetaMask. Users can seamlessly convert their BUSD to fiat currency whenever needed.

Key Benefits

BUSD provides a stable way to invest in the crypto space without worrying about volatility. Its direct 1:1 peg with the US dollar makes it an attractive option for those seeking to avoid market fluctuations. Regular audits and strict regulatory oversight ensure that BUSD is securely backed, giving users peace of mind.

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Binance USD's strengths

The token Binance USD (BUSD) has several strengths that make it a reliable and attractive stablecoin:

  1. Regulatory Approval: BUSD is one of the few regulated crypto tokens, having received approval from the New York Department of Financial Services (NYDFS). This ensures that it adheres to strict financial regulations, providing an added layer of security and trust for users.

  2. 1:1 Peg to USD: Each BUSD token is backed by a corresponding U.S. dollar held in reserve, ensuring a stable value equivalent to $1. This stability makes it an ideal choice for transactions and investments, minimizing the risks associated with cryptocurrency volatility.

  3. Strong Partnerships: BUSD is supported by major cryptocurrency exchange Binance and issued by Paxos, a regulated blockchain infrastructure platform. This partnership ensures compliance with regulatory standards and provides a robust infrastructure for the stablecoin.

  1. Wide Compatibility: BUSD is built on the Ethereum ERC-20 token standard, making it compatible with Ethereum-based smart contracts. Additionally, it is also compatible with Binance's BEP-2 standard, allowing it to operate on the Binance Smart Chain. This broad compatibility increases its usability across various platforms.

  2. Security Measures: Paxos, the issuer of BUSD, follows strict security protocols, including monthly audits by an accredited accounting firm. This ensures that the reserves backing BUSD are secure and accurately reflected in the token's value.

  3. Growing Adoption: BUSD has seen significant growth since its launch, with a large user base and increasing trading volumes. Its adoption is further boosted by its integration into various use cases, such as digital payments, liquidity provision, and yield farming.

These strengths make BUSD a reliable and attractive option for those seeking a stable and regulated cryptocurrency for transactions and investments.

Binance USD's risks

Binance USD (BUSD) is a fiat-backed stablecoin that is collateralized by U.S. dollars held in U.S. bank accounts on a 1:1 basis. Despite its regulated status and strict audits, BUSD still carries some financial risks.

One of the primary risks is the potential for market manipulation. Although BUSD has a low risk rating from InvestorsObserver, the scoring system indicates that the token can still be influenced by limited trading, which could impact its value. Additionally, the stablecoin market is highly competitive, with many alternatives available, which could affect BUSD's adoption and usage.

Another risk is the reliance on its partner, Paxos, to manage the U.S. dollar reserves. Any issues with Paxos could impact the stability of BUSD. Furthermore, as a stablecoin, BUSD is designed to mitigate price risk, but it is not entirely immune to market fluctuations. Users may still experience some volatility in their portfolio value over time.

Lastly, the fact that BUSD is not available to users in the U.S. and U.K. may limit its global reach and adoption, which could impact its financial performance.

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Did Binance USD raise funds?

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Binance USD’s team

  • Changpeng Zhao (CZ): Founder of Binance, a Chinese-Canadian business executive who was part of the team that developed Blockchain.info and previously served as CTO of OKCoin.
  • Paxos: The issuer of BUSD, a regulated blockchain infrastructure platform with a strong record of compliance with the NYDFS. Paxos holds the U.S. dollars backing BUSD in custody and conducts monthly audits of the bank reserves.
  • Sheila Bair: Former FDIC chairperson and member of Paxos' board of directors.
  • Bill Bradley: Former Senator and chairman of the Senate Finance Committee, member of Paxos' board of directors.
  • Patricia Kemp: Member of Paxos' board of directors from Oak Investment Partners.

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