Crypto Exchange Binance Reveals Reserves Backing BUSD Stablecoin in Push for Transparency
The world’s largest cryptocurrency marketplace is sharing data about the money behind its own US dollar-pegged stablecoin.
In a new announcement, Binance says it will regularly provide updates on the reserves behind the popular Binance USD (BUSD).
The move comes after several digital assets and their associated projects have collapsed this year while causing tens of billions of dollars in losses worldwide.
Binance says that, unlike other so-called stablecoins, BUSD is not only “100% backed by cash and cash equivalents”, but also regulated and approved by the New York State Department of Financial Services (NYDFS).
BUSD was launched in 2019 by Binance and Paxos and is currently the 6th largest crypto asset with a market cap of over $17.8 billion.
According to the announcement,
“If a stablecoin fails to maintain its value relative to its benchmark asset, the consequences can be devastating for its users.
The primary risk of reserve-backed stablecoins is that some of them cannot be fully covered by reserves.
This makes reserve transparency fundamental to determining how reliable a particular stablecoin is.”
Paxos provided the first detailed report documenting the distribution of BUSD reserves, with a market value of more than $17.6 billion at the end of Q2 2022.
Nearly $10.6 billion is held in U.S. Treasury bills and nearly $6.3 billion is parked in U.S. Treasury reverse repurchase agreements, with the remaining $738 million allocated to various cash-related deposits.
All told, only 4.1% of BUSD is currently backed by cash.
Binance says Paxos will provide updated reserve totals on a monthly basis.
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