Overview of the BUSD Stablecoin
BUSD (Binance USD) is a stablecoin pegged 1:1 to the U.S. dollar, designed to provide price stability to the cryptocurrency market. It was originally launched in September 2019 through a partnership between blockchain infrastructure company Paxos Trust Company and cryptocurrency exchange Binance (Binance).
The issuance of BUSD is divided into two main categories:
- ERC-20 BUSD issued by Paxos: This portion of BUSD operates on the Ethereum blockchain and is issued and managed by Paxos. It is strictly authorized and regulated by the New York State Department of Financial Services (NYDFS), and Paxos regularly publishes notarized reports on its U.S. dollar reserves to ensure transparency.
- Binance Pegged BUSD (Binance-Peg BUSD): To support a broader ecosystem, Binance has also independently issued “Binance” on other blockchains such as BNB Chain, Polygon, and Avalanche.These tokens are pegged 1:1 to the original ERC-20 BUSD; however, it is important to note that Binance-pegged BUSD is not regulated by the NYDFS.
Regulatory Turmoil and Suspension of Issuance
BUSD was once one of the largest stablecoins by market capitalization, but it faced serious regulatory challenges in early 2023 that completely altered its trajectory.
- NYDFS Order to Halt Issuance: On February 13, 2023, the New York State Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of new BUSD.The NYDFS cited unresolved issues regarding Paxos’ oversight of its relationship with Binance in connection with BUSD, as well as its failure to fulfill basic obligations regarding customer due diligence and risk assessment.
- SEC Wells Notice: Following NYDFS’s action, the U.S. Securities and Exchange Commission (SEC) issued a “Wells Notice” to Paxos, alleging that BUSD may be an unregistered security. Paxos strongly denied this, stating that BUSD does not constitute a security under federal securities laws.
Binance The Phase-Out of BUSD and the Rise of FDUSD
Facing regulatory pressure, Binance gradually ceased support for BUSD and encouraged users to switch to other stablecoins.
- Discontinuation of Trading Pairs and Withdrawals: Binance ceased support for the BUSD stablecoin on December 15, 2023.All spot trading pairs involving BUSD were delisted between December 11 and December 15, 2023. As of January 2, 2024, BUSD withdrawals were disabled.
- Automatic Conversion to FDUSD: The remaining BUSD balances in user accounts have been automatically converted at a 1:1 ratio to FDUSD (First Digital USD), a stablecoin issued by First Digital Group in Hong Kong.However, please note that this automatic conversion does not apply to users in certain countries and regions (such as Japan, France, Italy, Poland, and Kazakhstan).
- Paxos’ Redemption Commitment: Although Binance has ceased operations, Paxos has stated that its customers can still redeem their BUSD tokens for U.S. dollars for at least one year (through February 2024) and convert them to Pax Dollar (USDP).
The Final Outcome of the SEC Investigation and the Current Status of BUSD
Following a series of regulatory setbacks, the legal status of BUSD has recently been partially clarified.
- SEC Investigation Concluded: As of July 6, 2026, the U.S. Securities and Exchange Commission (SEC) has concluded its investigation into Paxos’ issuance of BUSD and has decided not to take enforcement action. This outcome sends a positive signal regarding Paxos’ legal compliance with BUSD regulations.
- Current Market Performance: As of this writing (August 1, 2026), the price of BUSD remains near the $1 mark, but its market circulation and trading volume have declined significantly.According to public data, BUSD’s market capitalization has plummeted from a peak of $23.4 billion in November 2022 to approximately $37 million today, with daily trading volume also at extremely low levels. This reflects that BUSD’s dominant position in the cryptocurrency market has faded, and its role has largely receded into the background.
The rise and fall of BUSD serves as a prime example of how the cryptocurrency industry—particularly the stablecoin sector—faces regulatory scrutiny and compliance challenges amid rapid development. Its experience also foreshadows that the future stablecoin market will place greater emphasis on regulatory compliance and transparency.
