USDT Dominates as BUSD Shrinks Due to Regulatory Issues

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Tether (USDT) recently experienced a huge increase in market capitalization, with BUSD experiencing FUD.

USDT, the dominant stablecoin by circulating supply, has enjoyed an increase of $1 billion in market capitalization, bringing its total value to $69.5 billion. This has happened as investors flee from the regulatory issues surrounding Binance USD (BUSD), which has been facing greater scrutiny recently. The market cap of USDT has risen from $68.5 billion since Monday, according to CoinGecko, the highest it has been since the turbulence of last June.

In contrast, Paxos, which is the issuer of BUSD for the exchange giant Binance, has been rapidly shrinking. Nansen, a crypto intelligence firm, has shown that Paxos has burned more than $1.8 billion worth of BUSD since Monday morning, with CoinGecko data confirming a fall in market capitalization from $16.1 billion to $14.3 billion over the same period, representing an 11% decline. Data by Nansen reveals that Paxos has burned $1.1 billion of BUSD in the past 24 hours.

Paxos Burned $1.1 Billion BUSD.
Paxos Burned $1.1 Billion BUSD. Source: Nansen

The $136 billion stablecoin market is currently experiencing significant changes, with U.S. regulators increasing the pressure on Paxos and BUSD, the third-largest stablecoin. Earlier this week, Paxos announced that it would stop minting BUSD after February 21, citing orders from the New York Department of Financial Services (NYDFS). Furthermore, the U.S. Securities and Exchange Commission (SEC) is preparing to sue Paxos for issuing unregistered securities.

Some, however, are not phased by this FUD. 

That includes the likes of CZ too. He has continuously emphasized that people should ignore the FUD. 

Other large-cap stablecoins, including USDC and DAI, have not been affected by these changes. This indicates that investors have either moved to Tether (USDT) or sold their BUSD holdings for other assets or fiat currency.

No FUD for BTC

Although Paxos and BUSD are currently facing regulatory issues, the cryptocurrency market is generally showing resilience. Bitcoin (BTC) continues to hover above $24,000. The market capitalization of Bitcoin is currently at around $475 million, with other top cryptocurrencies such as Ethereum also seeing gains in recent weeks despite the bear run.

While stablecoins are likely to remain under regulatory scrutiny, many market participants believe that these cryptocurrencies play a critical role in facilitating the transfer of funds between different exchanges and allow for quick and cost-effective trading. Consequently, regulatory frameworks must balance consumer protection with innovation in the fast-paced world of digital assets.

In summary, USDT’s dominance is increasing, and BUSD is under threat due to regulatory issues. Despite the challenges that Paxos and BUSD are facing, the cryptocurrency market as a whole is showing resilience. Stablecoins are essential in the world of digital assets, and regulatory frameworks must ensure a balance between consumer protection and innovation.

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