Binance USD (BUSD) is a stablecoin, pegged to and backed by the U.S. dollar.
It is supported by major cryptocurrency exchange Binance and is one of the few regulated crypto tokens in the market.
In particular, BUSD has regulatory approval from the infamously strict New York Department of Financial Services.
Binance was able to achieve this by partnering with crypto-based custodian bank Paxos, which has had a strong record of compliance with the NYDFS.
Being a stablecoin, Binance USD bridges the gap between fiat currencies and cryptocurrencies by enabling users to invest in the crypto space and blockchain technology without worrying about volatility.
Just like other stablecoins such as Tether (USDT) or USD Coin (USDC), Binance USD is pegged 1:1 with the U.S. dollar where 1 BUSD is equivalent to $1 in value.
Paxos is technically the issuer of BUSD, not Binance, since all the U.S. dollars backing up BUSD are kept in its custody.
Paxos follows the rules set for FDIC-insured Trust Companies, including monthly audits of the bank reserves by an accredited accounting firm.
How does Binance USD work?
Since BUSD was made by Binance, it complies with the BEP-2 standard and can operate on the Binance Smart Chain.
However, it was actually built on Ethereum, which classifies it as an ERC-20 token.
As an ERC-20 token, BUSD can be stored in popular Ethereum wallets like MetaMask and Exodus.
Its direct 1:1 peg with the U.S. dollar makes BUSD a more stable way to transact on Ethereum for those seeking to avoid volatility.
In other words, users can purchase goods and services on decentralized marketplaces on Ethereum without having to convert U.S. dollars into ETH.
To maintain the 1:1 peg of BUSD to U.S. dollars, Binance USD uses a deflationary mechanism.
For instance, when 50 BUSD is bought, a $50 payment is added to the Paxos treasury. Conversely, when 50 BUSD is sold, $50 is taken from the treasury and the equivalent amount of BUSD is burned.
Paxos also holds the power to suspend the transfer, creation, or destruction of BUSD tokens in case of major security breaches like hacking.
This function called “SetLawEnforcementRole” is in accordance with the Trust Charter, which is part of NYDFS oversight.
Team Background
Binance was founded by Changpeng Zhao or “CZ” as he is more popularly known in the crypto world.
CZ is a Chinese-Canadian business executive who was part of the team that developed Blockchain.info and also previously served as CTO of OKCoin.
Paxos is the first regulated blockchain infrastructure platform. On its board of directors are former FDIC chairperson Sheila Bair, former Senator and chairman of the Senate Finance Committee Bill Bradley, and Patricia Kemp of Oak Investment Partners.
Token Metrics:
- Holder Addresses: 4.1M on Binance Smart Chain, 143K on Ethereum, 10K on Avalanche
- Max Supply: Variable
- Circulating Supply: 21.6 billion BUSD