Home News All You Need To Know About BUSD

George Spencer

07 Dec 2021

All You Need To Know About BUSD

As people around the world are consistently becoming acquainted to cryptocurrencies like Bitcoin and Ethereum, other strong aspiring digital assets that use different technologies are making their way into the spotlight as well. One of the most notable ones used today are the stablecoins, which are cryptocurrencies with a more stable value that uses other assets such as fiat currency, commodities, and other cryptocurrencies to back their value. The value of a stablecoin changes depending on its backed assets, which are usually fiat currencies at the moment. That means 1 BUSD = 1 USD. Three main stablecoins widely known and used are Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).

What is BUSD?

Binance USD (BUSD) is a USD-denominated stablecoin approved by the New York State Department of Financial Services that was launched by Paxos and Binance. It is one of the few stablecoins that are highly regulated. In addition, it is very accessible and can be used for different trading and investing strategies.

History

The stablecoin was founded in 2019 through a partnership between Paxos and Binance in an effort to create a cryptocurrency that would be backed by the US dollar. Paxos holds an amount of US dollars that is equal to the total supply of BUSD to supply the USD value, and so the price of the stablecoin changes directly with the price of USD. BUSD provides a monthly audited report of reserves in compliance with stringent regulatory standards to ensure the security and safety of user assets. Because of its congenital properties as a stablecoin, BUSD has been performing exceptionally well and has managed to establish itself as a leader in the cryptocurrency space as it is the sixteenth-biggest cryptocurrency by market cap at the moment. Since its launch, the stablecoin has performed so well that it is now–at time of writing–an asset with a $13.5 billion market cap.

Why All The Buzz?

With an exceptional increase in crypto adoption this year thanks to price explosions, BUSD was adopted at extraordinary rates due to its reliability. As crypto innovations like DeFi and NFTs start to get in the spotlight, so did BUSD. At the moment, more than 1.5 million people are already holding BUSD. BUSD acts as a bridge between traditional finance and DeFi, presenting a newfound level of monetary freedom that isn’t offered by traditional currencies or institutions.

How it Works

To ensure financial stability, Binance, the stablecoin’s parent company, has guaranteed a US dollar behind every BUSD in capital reserve, ensuring a 100% reserve ratio. 100% of BUSD in circulation has a corresponding US dollar asset in the custody of a third party financial trust, and customers can convert between BUSD and US dollars at any time. As soon as BUSD is issued, it can be used with the stablecoin’s wallets for a range of purposes, including transactions, payments, wiring and reserves, just like any other cryptocurrency.

Pros

  • Pegged to the U.S. dollar at a 1:1 ratio
  • Fully collateralized and has audited reserves
  • It is the only crypto verified by financial institutions and audited by international accounting firms
  • Regulated by the New York State Department of Financial Services
  • A low-volatility asset that traders can hold.

Cons

  • Not suited for trading as it is a stablecoin
  • It is only available on Binance and Paxos

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