Binance USD, BUSD

Binance USD is a joint project of the Binance trading platform and fintech company Paxos. It was launched as a part of the Binance Venus blockchain project. It is reliable and transparent because Paxos has licences and permissions of regulators and is audited every month.

Users of Binance exchanges and services, all investors and traders are offered the BUSD stablecoin as an alternative to the fiat dollar. It is suitable for saving assets during crypto market turmoil. It is beneficial for those who are willing to convert cryptocurrency into something more stable and reliable.

Binance USD project history

The project with the stablecoin was created in September 2019 by famous companies — Binance Holdings Ltd and Paxos Trust Company, LLC. The first one was represented by its CEO Changpeng Zhao and his army of developers, while the second one came with a small team led by CEO Charles Cascarilla. Their goal was the modernisation of the financial system by launching a fail-safe global network with stablecoins that would assist other cryptocurrencies in liquidity improvement.

Binance and Paxos immediately received permission from the New York State Department of Financial Services. Also, Paxos Trust Company had already obtained the BitLicense because it had been issuing its own stablecoin—Paxos Standard (PAX)—for a long time. After a short official announcement, in mid-September, Wei Zhou (CFO at Binance) and Rich Teo (CEO at Paxos Asia) revealed the details of the partnership during the summit ‘Invest: Asia 2019’ in Singapore.

First, BUSD had been available for a direct exchange for PAX and USD through a personal account on the Paxos website. Then, in late September, the Binance exchange listed its own stablecoin paired with BTC, BNB, and XRP.

Binance USD cryptocurrency aspects

Binance USD concurrently operates in two blockchain networks. Since September 2019, first stablecoins have been issued in the Ethereum blockchain according to the ERC-20 standard. After a month, Binance has started issuing them in its Binance Chain according to the BEP-2 standard. This decision allowed implementing them into decentralized applications of two different blockchains.

Token contracts are used to issue Binance USD, so the stablecoin is technically not a coin but a token with a stable price. BUSD tokens issued on different blockchains are incompatible. So it is possible to send them only to the addresses of the corresponding networks and only through wallets with support for the corresponding blockchain.

To buy BUSD for the first time on the Binance exchange or the Paxos website, it is necessary to pass the KYC procedure. Verification is needed due to regulators’ requirements in terms of stablecoins and fiat currencies. It is all simple when it comes to the exchange — just make deposits in any currency on an account and buy BUSD in any of three ways:

1. For fiat currencies via an exchanger.
2. For stablecoins USDT, USDC, TUSD, and PAX through conversion.
3. For any supported cryptocurrencies by creating an order.

The exchange does not charge fees for buying BUSD but third-party payment systems and providers will charge their commission for deposits. The Paxos website also does not have fees, and buying is even easier: deposit either US dollars (by a transfer to the company’s bank account) or PAX stablecoins. Then the issuer creates a smart contract for an ordered amount of tokens and sends them to the buyer.

To sell BUSD, it is necessary to make a request for redemption and send them to the issuer’s address. Paxos will transfer US dollars to your bank account and ‘burn’ the redeemed tokens through a smart contract to balance the tokens in reserve and circulation. Redemption also does not have an imposed commission, and the whole process takes no longer than a business day.

The BUSD rate is pegged to the US dollar. Binance and Paxos maintain parity so that one token is equivalent to one fiat dollar. However, due to market volatility, which is stronger than the capabilities of these companies, deviations sometimes occur.

On our Binance USD chart, you can observe all token’s extremes. Thus, on 12 March 2020, BUSD reached its high at $1.05, and on 18 March — its low at $0.97.

The backing of the BUSD stablecoin

The BUSD price is stable because all issued tokens are backed by reserves on the accounts of Paxos Trust Company. At the same time, accounts in US banks are insured by the Federal Deposit Insurance Corporation. Paxos really does store dollars one-to-one and does not mix any other assets or account receivables with the reserve. Only this fintech company is an issuer and depositee. Parental and subsidiary companies of Binance Holdings do not hold any reserves of fiat dollars to back BUSD.

To assure everybody that it has a reserve and is capable of paying, every month Paxos gets audited and publishes results (pdf documents) on its website, paxos.com. The first audit took place way back in September 2019, and since then, not a month went by without it.

The permanent auditor is Withum, which is a member of the HLB International network. For 50 years, it has been offering tax, accounting, auditing, and consulting services. Its credibility and reliability of its results are beyond dispute.