BUSD Redemptions Exceed USD 290M in 8 Hours Following NYDFS Alert

BUSD Redemptions Exceed USD 290M in 8 Hours Following NYDFS Alert

The BUSD stablecoin had approximately 16.16 billion tokens in circulation on Monday morning, before Paxos published a press release at 6 am EST. In the next eight hours, nearly USD 290 million were redeemed, reducing the number of BUSD in circulation to 15.87 billion.

Increased Redemption Activity Due to Regulatory Scrutiny

The BUSD stablecoin experienced increased activity on Monday as the third largest stablecoin by market capitalization witnessed 286,720,127 BUSD redeemed in approximately eight hours. The increased activity began the previous day when reports claimed the US Securities and Exchange Commission (SEC) had sent Paxos a Wells Notice regarding potential charges. Earlier reports had claimed the New York Department of Financial Services (NYDFS) was investigating Paxos.

Paxos published a press release the following day, stating that it was cooperating with the New York Department of Financial Services (NYDFS) and would cease minting BUSD. The company added that "existing BUSD tokens will remain fully backed and redeemable through Paxos Trust Company through at least February 2024." Besides the Paxos press release, the New York regulator issued a Consumer Notice regarding the Paxos-issued Binance USD (BUSD) stablecoin.

Redemptions Lower BUSD Prices

Redemptions exceeded nearly USD 290 million redeemed on Monday, following billions redeemed in recent months. Three months ago, BUSD’s market capitalization was approximately USD 23.24 billion, and more than 30% of its supply had been redeemed in the past 90 days. Redemptions on Monday caused prices to dip, and BUSD dropped to a low of USD 0.992245 on February 13.

Much of BUSD’s trading is paired with Tether (USDT), followed by the Turkish lira, Makerdao’s DAI, and the US dollar, according to data from cryptocompare.com. Before the Paxos press release, BUSD’s trade volume was around USD 15 billion but increased 18% higher to reach USD 17.60 billion by 3:15 pm EST. In addition to a large number of redemptions, Binance CEO Changpeng Zhao (CZ) warned of significant repercussions on the crypto sector if BUSD is deemed a security.

What is your take on the impact of recent redemptions and regulatory scrutiny on the future of BUSD and other stablecoins in the market? Please post your comments.