Do more with BUSD, Binance's own stablecoin

ProductOct 21, 2022
Do more with BUSD, Binance's own stablecoin

Binance USD boasts the support of the biggest crypto exchange and the approval of a prominent regulator. Like Tether, it adds the stability of TradFi to the benefits of a digital asset. With 5.4 million holders, BUSD crypto is one of the most widely used stablecoins. Discover how to buy BUSD and why it is a worthy addition to your portfolio.

What is BUSD?

BUSD was launched in 2019, two years after Binance unveiled its first cryptocurrency, BNB. The stablecoin was created in partnership with Paxos Trust Company, the issuer of PAX and PAX Gold.

Like PAX, BUSD is pegged to the US dollar at a 1:1 ratio, and the underlying funds include cash and cash equivalents. As an ERC-20 token with BEP-2 support, it has broad blockchain compatibility.

From the start, Binance emphasized regulatory compliance. To help its stablecoin earn trust, it secured approval from the New York State Department of Financial Services (NYDFS). New York has stringent requirements for crypto — all businesses must obtain a virtual currency license (BitLicense) to operate in the state.

It didn't take long for the BUSD stablecoin to take off. Today, it is the seventh cryptocurrency and the third stablecoin by market cap, with a total of 21.7 billion tokens worth nearly $21.8 billion as of October 20, 2022. BUSD is available on 30+ exchanges across multiple blockchains:

  • Ethereum
  • BNB Smart Chain
  • BNB Beacon Chain
  • Polygon
  • Avalanche

Is BUSD safe?

BUSD meets all three requirements for a successful stablecoin, according to Binance — "regulation, audits, and sound reserves." Still, despite the claim that it is "always backed 100% by cash reserves without any leverage," BUSD is as stable as its collateral. Here are four aspects making BUSD special:

  • NYDFS is a primary prudential regulator known for its rigor. The green-listing of BUSD means pre-approval for custody and trading by any entity holding its BitLicense. According to Paxos CEO Dan Burstein, this milestone "validates the tremendous time, energy, and expense that Paxos puts into compliance."
  • As the issuer, Paxos Trust Company offers transparent minting and redemption, with segregated bankruptcy-remote accounts ensuring that the owners' funds are always available.
  • Paxos holds the reserves in FDIC-insured banks, and a trusted firm audits them regularly. Monthly attestation reports are available on the Binance website.
  • According to the latest reserve breakdown, 21.2 billion tokens were in circulation in August, backed by US Treasury debt, US Treasury collateralized reverse repurchase agreements, and cash deposits.

How does Binance USD work?

BUSD's tokenomics relies on a deflationary mechanism and the partner's blockchain infrastructure. As minting occurs on demand, there is no fixed BUSD calendar.

  • The platform holds a USD amount matching the total supply of the stablecoins. For example, a total supply of 14 billion BUSD means Paxos holds at least $14 billion in cash and cash equivalents.
  • For each BUSD token bought, one US dollar is deposited to the Paxos treasury.
  • For each BUSD token sold, one US dollar is withdrawn from the Paxos treasury and burnt.

How is the BUSD stablecoin used?

BUSD's utilities are similar to other popular stablecoins. The support of the primary reserve currency makes it a safe haven amid market turbulence, like Tether or USD Coin. BUSD bridges traditional and decentralized finance, giving users the best of both worlds.

Store of value

The stablecoin supports liquidity in the crypto economy. With a BUSD wallet, crypto holders can redirect their funds without exiting the crypto market. For example, those expecting BTC to drop can exchange their coins for BUSD, weather the storm, and repurchase BTC afterward.

Decentralized finance

As BUSD meets the ERC-20 and BEP-2 standards, it works with all wallets, exchanges, and smart contracts based on these blockchains. You can earn interest by depositing your holdings, engaging in yield farming, or joining liquidity pools.

Yield and conditions vary. For example, the BUSD interest rates through Binance Earn reach 8% APR, but  BUSD staking has limitations — the rate drops below 1% for deposits over 1,000 BUSD.

Crypto payments

In 2020, Binance partnered with BitPay, a crypto payment provider for 250+ companies, including Microsoft and Amazon. BitPay merchants accept payments for goods, services, and gift cards in BUSD.

This expansion opened new opportunities for businesses worldwide, allowing them to benefit from a stable and efficient blockchain-based method. BitPay also processes donations for Binance Charity, a 501(c)(3) non-profit supporting the UN's Sustainable Development Goals.

Advantages of BUSD

Like other stablecoins, BUSD is not a speculative asset. Instead, its benefits stem from predictable value and Binance's focus on compliance.

Strong regulation

Binance regards compliance and regulatory oversight as "the most important component of BUSD's trustworthy reputation." NYDFS green-listed the digital asset in 2020, allowing any business with a BitLicense to use BUSD for its approved purposes.

Fully backed by insured funds

All tokens in circulation are backed by cash held in US banks insured by the Federal Deposit Insurance Corporation (FDIC). What's more, all Paxos Standard bank accounts are audited by Withum, one of the best tax and accounting firms in the US, according to Forbes. Paxos also publishes a monthly reserve report.

No fees

Users do not pay for issuance or redemption, and Binance does not charge any maker or transaction fees on its stablecoin pairs. Withdrawing BEP-20 tokens through BNB Smart Chain is also free.

Security

Segregated bankruptcy remote accounts protect the funds of all BUSD holders. If the custodian — Paxos — becomes insolvent, the NYDFS Superintendent will return all assets to their owners, bypassing cumbersome procedures thanks to the New York Banking Law.

Mass adoption

Thanks to its multi-blockchain compatibility, BUSD has many applications outside of Binance. As the third-biggest stablecoin, it is supported by over 36 exchanges and over 20 wallets.

BUSD is also an on-site and offline payment method. The options are not limited to BitPay — Binance Pay users can spend crypto at stores like Travalata.com and CryptoRefills.

BUSD price

The stablecoin adheres to its peg — as of this writing, the BUSD price is exactly $1.00. According to CoinGecko, it saw its all-time high of $1.15 on May 13, 2020, and the all-time low of $0.901127 on May 19, 2021. When in doubt, you can use the BUSD to USD calculator next to the price chart.

In May 2022, when the crypto ecosystem was bleeding red, some investors turned to BUSD as a replacement for the failed UST. According to Binance, its token withstood the de-pegging pressure thanks to licensing and "independently attested fiat reserves."

BUSD price chart. Source: CoinGecko
BUSD price chart. Source: CoinGecko

Key difference: BUSD USDT

These tokens share the 1:1 peg and offer fast and inexpensive transactions. However, Tether's management of the underlying assets caused controversy in the past. Despite a lower trading volume, BUSD outshines it in compliance — it has undergone more audits, and US banks back its tokens.

USDT relies on offshore banks, which may not provide the same level of protection as FDIC insurance. At the same time, it is more tradeable and has been around longer than BUSD crypto — since 2014.

Where to buy BUSD

You can purchase the stablecoins on popular crypto exchanges (DEXs and CEXs), including Binance, where it is exchangeable for 300+ cryptocurrencies. Alternatively, get BUSD directly, convert BUSD to USD, or redeem your tokens for PAX on the Paxos platform. BUSD is also accessible via Dapps like PancakeSwap.

On Binance, you can buy BUSD with credit card or debit card, via a bank wire, P2P trading, or third-party services like AdvCash. Please note that Binance.US supports debit cards, ACH transfers, and purchases with a USD balance on the platform.

BUSD on CoinLoan

CoinLoaners borrow, exchange, and buy BUSD or use it as collateral for quick crypto loans. Take advantage of our attractive conditions, including competitive BUSD APY! You can profit passively by keeping your holdings on CoinLoan — a secure, trusted, and regulated platform.

Use this in-demand stablecoin to the fullest via our app or web interface. We offer a comprehensive, intuitive environment where everything you need is at hand. Explore your options today:

BUSD and BUSD-backed loans

Borrow BUSD using another crypto as collateral, or try the opposite. You can get XRP, WBTC, XMR, and other popular assets via flexible instant loans backed by BUSD.

Choose the most convenient period and LTV rate to take charge of your finances. Crypto loans eliminate credit checks and additional paperwork — you only need enough collateral and a verified account.

BUSD interest rates

Deposit your BUSD to Interest Account to secure an attractive APY. Make the most of our passive income feature by staking CLT. CoinLoan offers:

  • 10.3% APY on BUSD
  • Up to 12.3% APY on BUSD with CLT Staking

Buy or swap BUSD on CoinLoan Exchange

You can swap BUSD for crypto and fiat currencies through our user-friendly exchange. The opportunities include BUSD/BTC, BUSD/ETH, BUSD/ADA, BUSD/XMR, and many more! Trade your holdings at any time — just click or tap on the BUSD logo in the drop-down menu, choose the second currency, and enter the amount!

Final word

BUSD is more than a trusted volatility hedge. It generates passive income, facilitates online shipping and charity, works across blockchains, and boasts the support of the world's biggest CEX. This fiat-collateralized stablecoin drives the mainstream adoption of crypto payments. Explore BUSD's potential and put it to work on CoinLoan!

Disclaimer:

The information provided by CoinLoan (“we,” “us,” or “our”) in this text is for general informational purposes only. All investment and financial opinions expressed by CoinLoan in this text are from the personal research and open information sources and are intended as educational material. All outlined information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information in this text.

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