Tether’s flagship token, USDT, increased by nearly $1 billion in the aftermath of a regulatory crackdown on one of its rivals, BUSD.
The token’s market cap began at $68.47 billion on Tuesday before skyrocketing to roughly $69.23 billion around 9:10 a.m. EST, according to CoinMarketCap data.
Meanwhile, the Paxos-issued BUSD has dropped from $16.14 billion on Monday to $15.46 billion on Tuesday, a nearly equivalent drop. Following orders from the New York Department of Financial Services, the company behind the token, Paxos, confirmed that it would cease minting new units of the stablecoin beginning next week (NYDFS).
Stablecoins, such as BUSD and USDT, are cryptocurrencies whose value is tied to the US dollar. Each is backed by multi-billion dollar reserves, the majority of which are cash and US Treasury bills, but has the programmability and transferability of a crypto asset. Investors frequently trade against such tokens on CeFi and DeFi exchanges when purchasing more volatile cryptos, making them the crypto economy’s backbone.
BUSD’s losses may indicate that those seeking stablecoin liquidity are flocking to Tether, the long-time king, to avoid future regulatory crackdowns in the US. Unlike Paxos and Circle, which issue the second largest stablecoin, USDC, Tether is owned by iFinex, a Hong Kong-based company.
According to DeFiLlama data, Tether’s latest gains increase its stablecoin market dominance to 50.77%, with the total market worth $136.93 billion.
USDC, on the other hand, may benefit in the long run from the demise of the BUSD. Binance CEO Changpeng Zhao confirmed that his exchange will have to shift away from using BUSD when consolidating stablecoin liquidity, potentially allowing USDC to thrive again.
Binance began converting most major stablecoins, including USDC (but not USDT), into BUSD when they were deposited on the exchange in September. This meant that any USDC sent to Binance was effectively sucked into BUSD’s market cap, affecting each coin’s market dominance.
The SEC also issued a Wells notice to Paxos for allegedly issuing BUSD as an unregistered security. Dante Disparte, Circle’s Chief Strategy Officer, stated on Tuesday that the company has yet to receive a similar notice.
