World-famous exchange Binance recently admitted to being $1 billion short of collateral on its BUSD peg.
On Tuesday, Binance acknowledged flaws in its system that at one point left it at least $1 billion undercollateralized at the expense of the Binance Smart Chain BUSD peg. According to a Binance spokesperson:
“The process of maintaining the peg involves many teams, is not always perfect, and may have led to operational delays in the past. Discrepancies checking has been enhanced to always stick to 1:1.”
Additionally, analysts have revealed that major exchange stablecoins have slipped their pegs by their large margins more than once. They claim that there is a difference between the amount of BUSD on the Binance peg and the actual amount of BUSD that backs it. According to these analysts, the figure put him above $1 billion each time there was a glitch.
A Binance spokesperson noted that the fixed issue did not affect user redemptions. did not. Furthermore, the Binance mouthpiece does not say when the cryptocurrency exchange discovered and fixed the issue.
Nevertheless, Binance addressed the “timing mismatch” in a blog post, explaining:
“It is clear from the data that rebalancing has not always kept up with the demand for Binance-Peg BUSD. , rebalancing more frequently.”
Binance BUSD Peg
The Ethereum blockchain version of BUSD enjoys full US dollar collateral, largely thanks to fintech company Paxos. However, BUSD on Binance Smart Chain does not have the same external regulation. To justify BUSD, the major exchange claims to use his BUSD in his Paxos regulation as an enabler. Therefore, this Binance Smart Chain bound BUSD is called Binance-Peg BUSD.
Headwinds for stablecoins
The resilience of stablecoins and whether they are backed by a reliable source of funding is a controversial topic in the crypto space. Because it seems to track value closely. For example, if an investor invests his $10 billion in a stablecoin, $10 of cash must be available somewhere to back this investment. In practice, however, stablecoins have failed to provide adequate backing, and some have even crashed, such as Terraform Labs and his TerraUSD token.
This perceived lack of trust in stablecoins indicates that regulators and the press are increasingly focusing on stablecoins. Even Tether’s USDT, the most famous stablecoin, has been criticized for years over concerns that it lacks complete backing. and had to pay a fine of $18.5 million. Bitfinex was also blamed, and New York Attorney General Letitia James said at the time:
“Tether’s claim that cryptocurrencies are always fully backed in USD is a lie. [Bitfinex and Tether] It was run by unlicensed and unregulated individuals and entities trading in the darkest corners of the financial system, masking the true risks faced by investors. ”
On the other hand, the persistent cryptocurrency epidemic beyond 2022 is also affecting stablecoins.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to explain the cryptocurrency story down to the basics so that anyone can understand it without much background knowledge. Krypto When he’s not heavily involved in storylines, Tolu enjoys music, loves to sing, and is also an avid movie buff.