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What is Binance USD (BUSD)
Binance USD (BUSD) is a USD-backed stablecoin. The token is issued by the American financial company Paxos Trust.
The dollars that secure the token are kept in the bank accounts of this company. Each time dollars are deposited into the Paxos Trust bank accounts set aside to back up Binance USD, a corresponding number of tokens are generated. And the withdrawal of dollars from these bank accounts is carried out only when the corresponding amount of BUSD is destroyed.
What does Binance have to do with it?
Paxos Trust provides services for the issuance and maintenance of cryptocurrency tokens on a White Label basis. This means that the tokens issued by the company go into circulation under the trademark not of the developer and issuer, but of the customer. For example, HUSD tokens are issued by order of Huobi. And from the name of the Binance USD tokens, it is clear that the cryptocurrency exchange Binance became the customer of their issue.
BUSD tokens are intended to become the main stablecoin used in the ecosystem of the Binance exchange over time.
Distinctive features of Binance USD
- Guaranteed BUSD exchange rate for dollars
The most important distinguishing feature of the BUSD token is the issuer’s approval of the readiness to instantly redeem these tokens from the holder. The redemption is made at a rate of 1: 1, with no commission and no limits. By comparison, the issuer of USDT tokens, Tether Limited, has warned in its legal documents of possible delays and barriers to token redemption.
- Affiliation with the largest crypto-exchange
The stablecoin BUSD is involved not only in trading on the centralized and decentralized Binance platforms, but also in the Binance Pay payment system launched in February 2021, and in the Binance Card payment cards. Thus, Binance customers from the countries in which these two payment services operate receive a full-fledged alternative to non-cash fiat currency in the form of BUSD. Tokens can be used to pay for purchases, transfers and cash withdrawals.
Investment potential of BUSD
To draw attention to the BUSD stablecoin, Binance has provided those who use it with a number of discounts and bonuses. For example, in 2020, using BUSD with any Binance investment vehicle yields 1 percentage point higher than using USDT. In 2021, there is no longer such a bonus: the yield on BUSD and USDT is the same.
In terms of investment, even on the main BUSD platform, this token has no advantages over the Tether token. And outside of Binance, Tether has incomparably higher investment potential. You can view the BUSD cryptocurrency list price on the LestExchange website.
Therefore, it does not make much sense yet to choose Binance USD tokens for investments. Perhaps the situation will change when competitive DeFi projects appear on the Binance Smart Chain.
BUSD tokens are traded primarily on the Binance exchange. In addition to this platform, trading pairs with BUSD are present on several relatively small exchanges: P2PB2B, Coinsbit and others. The trading volumes and liquidity on these exchanges are small, so only Binance can be considered seriously for trading BUSD.
Ethan Moore, crypto and stock trader since 2012. Co-founder of Blockwatch experts team.