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BUSD: All You Need To Know About the Stablecoin

2021-11-16
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Main Takeaway

  • Stablecoins are cryptocurrencies with their values pegged to another asset.

  • BUSD is a stablecoin founded by Paxos and Binance, and is one of the few stablecoins that are compliant with the strict regulatory standards of NYDFS.

  • In addition, there are currently more than thirty-six exchanges and more than twenty wallets supporting BUSD, making it a reliable option for stablecoins.

Stablecoins are an important crypto asset class that has been gaining popularity with traders and investors alike. One of the few stablecoins that provides monthly audits is BUSD, making it a highly regulated asset. Learn about what BUSD is used for, the advantages BUSD has to offer, and the advancements it has made in the space.

The world of cryptocurrency is becoming more popular with each passing day. As more people around the world become acquainted with crypto assets like Bitcoin, BNB and Ethereum, other strong contenders that use different technologies are making their way into the crypto ring as well. One of the most prominent types of crypto used today are stablecoins, which are cryptocurrencies whose values are pegged to fiat currencies, such as the US dollar. Three main stablecoins that are widely used are Tether (USDT), USD Coin (USDC) and Binance USD (BUSD). Each of the stablecoins mentioned have a value equivalent to one US dollar.

Now that we have covered the basics of BUSD, let’s take a deep dive into what it’s used for, and why it is becoming a leader in the cryptocurrency space!

What is BUSD Used for?

The BUSD stablecoin was founded by Paxos and Binance in an effort to create a cryptocurrency that would be backed by the US dollar. A key characteristic of BUSD is that one unit of BUSD is equivalent to one US dollar. To support this value, Paxos holds an amount of US dollars that is equal to the total supply of BUSD. Therefore, the price of the stablecoin fluctuates directly with the price of USD. BUSD provides a monthly audited report of reserves in compliance with stringent regulatory standards to ensure the security and safety of user assets.

Because of its stability in relation to the US dollar, BUSD empowers traders and crypto users with the ability to transact with other digital and blockchain-based assets while minimizing the risk of volatility. Due to the nature of cryptocurrency, crypto holders may experience volatile changes in their portfolio value. Using a stablecoin such as BUSD can help significantly to hedge against periods of market volatility.

Because of its intrinsic properties as a stablecoin, BUSD has been able to perform exceptionally well and establish itself as a leader in the cryptocurrency space. Since the launch of BUSD in 2019, the stablecoin has performed so well that it is now (at time of writing) an asset with a $10 billion market cap.

Why is BUSD so Popular?

With an exceptionally large increase in crypto adoption in 2021 due to Bitcoin and altcoin price explosions, BUSD was adopted at unprecedented rates due to its reliability. As crypto innovations like DeFi and NFTs start to gain popularity, so has BUSD.

With over one million people already holding BUSD, it is clear that these early adopters trust the stablecoin and prefer using it for their DeFi activities. Specifically, BUSD acts as a bridge between traditional finance and DeFi, presenting a newfound level of monetary freedom that isn’t offered by traditional currencies or institutions. In addition, stablecoins help protect their users from threats like inflation and offer attractive APYs for DeFi services. BUSD users can take on yield farming and liquidity pools with more financial protection from uncertainties than in fiat-related or crypto-heavy products.

Trade Stablecoins on Binance with Multi-Assets Mode

BUSD also allows users to trade with multiple contracts any time.  Due to its interoperability and accessibility, BUSD gives traders the ability to trade with much greater ease, speed and flexibility. Furthermore, Binance also offers a feature called Multi-Assets Mode which allows trading with stablecoins, thus providing traders with even more flexibility and protection when trading. For more information on Multi-Assets Mode, see our article in Binance Blog.

Why Use BUSD Outside of the Binance Ecosystem?

BUSD is an incredibly useful monetary asset that can be used anywhere outside of Binance due to its exponential adoption. Its global adoption has created one of the largest networks in the cryptocurrency industry. Not only is it often used as an investment tool for derivatives trading, it’s also a popular choice for people looking to stabilize their personal funds. As many countries around the world have unreliable currencies, BUSD and other stablecoins have become a safe haven for people looking to climb out of poverty.

BUSD is also trusted as a stable, reliable crypto-financial product due to its adherence to rigorous regulatory standards. Officials of the New York State of Financial Services (NYDFS) take on the responsibility of enforcing specific rules and measures on Paxos and Binance with regards to how the stablecoin operates, how it is backed, and how it is ultimately collateralized. Paxos also has the ability to create and burn BUSD tokens at will, as well as freeze and remove funds from people who exhibit nefarious or illicit activity.

Finally, as alluded to earlier, the primary reason why people around the world use BUSD is because it is backed by an equal amount of USD. As the US dollar is still the world’s reserve currency and strongest fiat currency, it shares the same sentiment of being a stable and reliable option to store one’s value.

Paxos ensures the value of BUSD by performing regular audits to ensure the US dollar reserves held is equal to the supply of BUSD at a 1:1 ratio. These audits are carried out alongside Withum, an accounting firm.

Many other stablecoins do not offer these assurances to their users. Therefore, the strict regulatory standards that BUSD adhere to set a new industry standard, making BUSD one of the best choices when it comes to stablecoins.

Is BUSD Safe?

Since BUSD is one of the only stablecoins that is 1) subject to regular third party audits and 2) strictly regulated to maintain a 1:1 BUSD to USD ratio, it is considered by many to be one of the safest stablecoins available on the market.

Current State of BUSD

Some of the latest developments seen on the BUSD scene includes implementations of the stablecoin as an on-site and offline payment / settlement options for private businesses. For example, certain hotels offer their guests the chance to book a stay using a QR code that allows users to pay using BUSD.

In the crypto industry, new partnerships have also emerged for BUSD including BitPay, Simplex, Moonpay, Alchemy and several more. In fact, Binance has recently released Binance NFT which supports BUSD quotations for NFT products. With more than thirty-six other established exchange platforms and more than twenty wallets supporting BUSD, trading with stablecoins continues to become easier for anyone anywhere.

The amount of users that choose to work with BUSD has grown exponentially as the stablecoin enjoys rising adoption and interest from users. In the summer of 2021, the amount of daily active addresses averaged between ten and fifteen thousand, while the total number of BUSD holders is roughly 1.1 million.

Conclusion

BUSD is one of the few stablecoins that are highly regulated. In addition, it is very accessible and can be used for different trading and investing strategies.

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