Bye BUSD, Hello FDUSD  

The market is changing: let’s take a deeper look.

Here at Stablecomp, our primary concern is offering the best outlook on the Stablecoin market available on the market. Binance USD (BUSD) has been a staple of liquidity in the cryptocurrency sector for years, reaching more than $16 Billion in market capitalization; but recent legislative and political pressures on its issuer, with the token being defined as an unregistered security in the United States, have changed its structure and prevalence. Can its de facto substitutive stablecoin, First Digital USD (FDUSD) be trusted to deliver wide scale liquidity and stability to many anxious investors?

BUSD’s halt has been concretely in the air since the beginning of the year. After several investigations into Binance and its operations by U.S. Legislators such as the Securities and Exchange Commission (S.E.C.), which supports the thesis in which Binance has broken several financial laws in its jurisdiction, the first bell started to toll. In February, the New York Department of Financial Services, regulator for Stablecoin issuer and intermediary Paxos, ordered the company to stop issuing BUSD. Paxos managed all direct BUSD issuance on the ERC-20 network, with Binance minting pegged tokens on other Blockchains. While the NYDFS doesn’t control these pegged tokens, and circulating tokens would still remain circulating, the targeting of Paxos was a concrete blow to Binance and its Stablecoin.

Paxos kept a 12 month window of support for BUSD redemption, which ends in February 2024. And as August dwindled, the biggest exchange in the world came out with its own position regarding the matter.

Binance confirmed it would, as well, stop supporting BUSD in February 2024; this means that users will not be able to trade or redeem their BUSD in any other cryptocurrency or FIAT currency after this period ending. In its statement, the exchange encouraged users to convert their BUSD into FDUSD, a stablecoin issued by Hong Kong based company First Digital since June 2023. First Digital has been operative since 2019, and comes from the traditional finance world; their self-proclaimed mission is to bring tradition to the digital world.

FDUSD is intended to be backed 1:1 in U.S. Dollars or assets of equivalent value. While many worries around fund and liability disclosure and stability have been floating around the space since the Terra and FTX collapses, FDUSD seems to have both areas covered: The stablecoin and its reserves will have to periodically be subjected to external auditors’ scrutiny to gain an “Attestation of Reserves”; also, it is mandated that First Digital keep the stablecoin’s reserves in segregated accounts.

With the commingling of funds being prohibited, and external audits being mandated, FDUSD seems to be a safe haven for investors who are looking to convert their BUSD at a cost of zero dollars; Binance has confirmed that the trading pair fees are absent.

FDUSD currently has a $393 Million Market capitalization.

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