BUSD FUD: Understanding the Controversy Surrounding the Stablecoin

Binance USD (BUSD) is a stablecoin pegged to the value of the US dollar, and is one of the most widely used stablecoins in the cryptocurrency market. However, recent events have caused controversy surrounding the stablecoin, with some individuals and groups spreading FUD (fear, uncertainty, and doubt) about BUSD. In this article, we will explore what BUSD FUD is and its impact on the cryptocurrency industry.

What is FUD?

FUD is a combination of the first 3 letters of:

• Fear (fear)
• Uncertainty (not sure)
• Doubt (doubtful).

This is a form of negative psychology, giving investors a feeling of anxiety, uneasiness and unease about an investment object.

In the fields of business investment and politics, FUD is seen as a tactic to release fake and unauthenticated information to influence readers’ perception and create false information for the purpose of manipulation. market.

The people who cause FUD are usually organizations or individuals with influence in the market. They use this “trick” to serve their own interests.

What is BUSD FUD?

BUSD FUD refers to the spread of negative rumors and false information about Binance USD. The spread of FUD is not a new phenomenon in the cryptocurrency world, and it is often used as a tactic to manipulate the market and drive down the value of a particular asset.

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Issuer and developer of BUSD 

BUSD (Binance USD) is a stablecoin issued by Paxos Trust Company in partnership with Binance, which is one of the world’s largest cryptocurrency exchanges. Paxos Trust Company is the issuer and custodian of BUSD and is regulated by the New York State Department of Financial Services (NYDFS).

Binance USD (BUSD) is a stablecoin belonging to the Binance exchange and is pegged at a 1:1 ratio to the US dollar. That is 1 BUSD = 1 USD.

BUSD is 100% backed by fiat and equivalent assets. This stablecoin has a centralized management and buyback mechanism to maintain price stability in the market by itself. Currently, it is one of the most popular stablecoins and is ranked #7 in the market capitalization list according to Coinecko.

A highlight case of BUSD FUD

There was a case of BUSD FUD that occurred in late 2020 when a Twitter user claimed that Binance was insolvent and that its stablecoin, BUSD, was not backed by sufficient reserves. This caused panic among some investors and traders, leading to a temporary drop in the price of BUSD.

Binance quickly responded to the allegations, stating that the claims were baseless and that BUSD was fully backed by reserves. The company also provided evidence to support their claim, including independent audits and reports on the reserves backing BUSD.

Despite these efforts, some investors remained skeptical and continued to voice concerns about the stability of BUSD. The situation was further exacerbated by ongoing regulatory scrutiny of stablecoins, which caused uncertainty and volatility in the market.

Find out the causes and reasons for FUD BUSD

The SEC accuses Paxos of using stablecoin. BUSD is an investment.

In collaboration with Binance, Paxos, a financial institution and blockchain technology business with headquarters in New York, has launched the stablecoin BUSD.

The US Securities and Exchange Commission (SEC) was getting ready to sue Paxos on February 12 on the grounds that the stablecoin is an unregistered asset. The statement occurs as the US tightens its control over cryptocurrency-related activities.

Paxos was also told to cease issuing BUSD by the New York Department of Financial Services on February 13.

The SEC had claimed that BUSD was a security, and soon after, Paxos declared that they totally disagreed with this claim. Faced with accusations from the SEC, Paxos specifically answered as follows: 

In reality, the defendant has 30 days from getting the Wells Notice to file a legal brief called the Wells Submission in response, which includes arguments to refute the allegations.

However, Paxos also stated right away that, in accordance with instructions and in close consultation with the New York Department of Financial Services, it would cease issuing new stablecoins BUSD as of February 21, 2023. (NYDFS).

The support for previously released BUSD coins is still complete. Up until “at least February 2024,” Paxos will help clients convert BUSD to USD or USDP using the Paxos Trust Company.

Some of the common claims made by those spreading BUSD FUD include:

• The stablecoin is not backed by actual US dollars
• The stablecoin is not audited or regulated
• Binance, the company behind BUSD, is involved in illegal activities

Are these claims true?

• The first claim, that BUSD is not backed by actual US dollars, is false. Binance has stated that BUSD is fully backed by US dollars held in reserve, and has released reports to verify this claim.
• The second claim, that BUSD is not audited or regulated, is also false. Binance has claimed that BUSD is regularly audited by a third-party accounting firm, and the company has obtained regulatory licenses in various jurisdictions, including the United States.
• The third claim, that Binance is involved in illegal activities, is a more complex issue. While there have been allegations of illegal activities involving Binance, the company has denied these claims and has stated that it operates in compliance with all relevant laws and regulations.

Will BUSD be dep-eged?

The dep-eg event of Stablecoins occurs when:

In a short time there is a large amount of Stablecoins being exchanged for other Stablecoins or assets.

The anchored asset does not guarantee the corresponding value for that Stablecoin.

According to a report from Paxos on 10/02/2023, more than 16.1 million BUSD is secured by net worth of 16.4 million BUSD (1.8% greater).

In fact, in the event that all of BUSD is sold into USD in a short time, Paxos can still afford to guarantee the 1:1 ratio.

The number of government bond assets and buyback agreements (backed by government bonds) of Paxos are quite safe and have good liquidity. At the same time, they are audited by WithumSmith+Brown, PC, a company with headquarters in the United States.

Therefore, de-peg speculation on BUSD is temporary (unless there are risks of further volatility in financial markets, audit, regulatory and liquidity risks).

Impact on the cryptocurrency industry

The Busd Fud incident is an example of how quickly rumors and misinformation can spread in the cryptocurrency industry. While some traders and investors may have been able to take advantage of the temporary dip in the price of BUSD, the incident has had a negative impact on the industry as a whole.

One of the most significant impacts of the Busd Fud incident is that it has further eroded trust in the cryptocurrency industry. Cryptocurrency markets are already known for their volatility and uncertainty, and incidents like this only serve to reinforce the perception that cryptocurrencies are risky and unreliable.

In addition, the Busd Fud incident highlights the need for more robust regulation and oversight in the cryptocurrency industry. While decentralized exchanges and other peer-to-peer trading platforms have their benefits, they also make it easier for bad actors to manipulate markets and spread false information. As the industry continues to mature, regulators and policymakers will need to develop new frameworks and tools to protect consumers and ensure the integrity of the markets.

Finally, the Busd Fud incident has also had a practical impact on traders and investors. Those who were caught up in the panic and sold their BUSD holdings at a loss may have missed out on potential profits as the price quickly rebounded. This serves as a reminder that it is important to remain calm and rational in the face of market volatility, and to have a well-planned trading strategy that can help mitigate risk.

Solution for BUSD FUD

The best solution for BUSD FUD is for the issuer of the stablecoin, Binance, to be transparent and provide regular audits and reports on the reserves backing BUSD. This would provide assurance to investors and traders that their funds are safe and that the stablecoin is actually backed by sufficient reserves.

Additionally, other stablecoin issuers could learn from the situation and improve their own transparency and reporting standards to avoid similar concerns in the future. This would help to increase confidence in the stablecoin market as a whole.

Furthermore, regulators could step in and enforce stricter rules and regulations on stablecoin issuers to ensure they are maintaining appropriate reserves and providing sufficient transparency to investors.

Finally, investors and traders can also do their own research and due diligence before investing in any stablecoin or cryptocurrency. They should look for stablecoins with a strong reputation and a history of transparency and accountability. It is also important to diversify their portfolio and not rely too heavily on any single stablecoin or cryptocurrency.

Conclusion

In conclusion, BUSD FUD is a phenomenon that has caused controversy in the cryptocurrency industry. While some claims about the stablecoin may have some merit, it is important to separate fact from fiction and conduct thorough research before making any investment decisions.

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