Binance Global, the world’s largest cryptocurrency exchange, has admitted to flaws in its system of undercollateralizing its BNB smart chain-based BUSD stablecoin by as much as US$1 billion at least three times, according to a Bloomberg report Wednesday. rice field.
See related articles: Binance stablecoin conversion is controversial, but what does it mean for users?
quick facts
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Also known as Binance-pegged BUSD, this token is designed to maintain a stable value of 1 USD through reserves of another version of BUSD that runs on the Ethereum blockchain.
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Ethereum-based BUSD is backed by US dollars and overseen by Paxos Trust Company, LLC, a New York-based financial technology company. Binance claims that this version is fully supported by fiat currency.
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According to Bloomberg, a Binance spokesperson said, “The process of sustaining backing involves many teams and is not always perfect, which may have led to operational delays in the past. “Recently, the process has been significantly improved with stronger discrepancy checks to ensure that it’s always backed up by 1 [to] 1.”
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The spokesperson added that no customers were impacted despite these discrepancies, but how long the Binance-pegged BUSD had been unsecured in total, and how long the company was first aware of the problem. I didn’t check the timing.
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Binance made the controversial decision in September to convert three stablecoins held by its customers, USDC, Pax Dollar (USDP), and True USD (TUSD), into BUSD.
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Stablecoins play an important role in the cryptocurrency industry by allowing investors to maintain constant value within a volatile ecosystem. According to CoinMarketCap, four of the top 15 cryptocurrencies by market capitalization are stablecoins. BUSD is now his 7th highest market capitalization in the industry, accounting for US$16.4 billion.
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Binance-pegged BUSD is designed to allow stablecoins to run on Binance’s own blockchain, and accounts for $5.4 billion of total BUSD market cap.
See related articles: Binance Moves To Remove USDC, Others Are Questioning Market Conduct
