The crypto space is facing many challenges in the face of changing regulations, but stablecoins such as BUSD stand poised to address many of these challenges. Acting as a bridge between the fiat and digital, Stablecoins like BUSD are coming to occupy a bigger and bigger space within the DeFi world.
What is Binance USD (BUSD)?
Binance USD (BUSD) is a 1:1 collateralized, dollar-backed stablecoin that operates with a strong degree of interoperability, financial regulatory cohesion, and liquidity stability. Originally BUSD operated on the Binance Smart Chain, but after partnering with the Paxos, a New York-based financial technology firm in 2019, BUSD moved to the Paxos Blockchain.
With a market cap of 14 Billion, BUSD has gone on to garner a strong reputation amongst the crypto community and much of the financial world beyond. The increasing popularity of stablecoins such as Tether, USDC, and of course, BUSD has signaled to many industries that the use of stablecoins represents great opportunities, financial versatility, and greater levels of crypto integration.
In this article, we will explore the Use Case of BUSD and its emerging place within the financial world.
Binance USD Use Case: Stablecoin to Reduce Volatility
Stablecoins are an emerging form of digital asset that offers users some unique advantages when conducting business. The function of these ‘pegged’ or ‘linked’ coins underpins much of the use case for BUSD in general. Essentially a stablecoin refers to a cryptocurrency that is ‘linked’ or ‘pegged’ to the value of another asset, that can be traded on a crypto market. This linked asset can be gold, silver, other cryptocurrencies, or even some combination, but generally speaking, the pegged asset is usually that of a stable fiat currency. Mainly the US dollar. BUSD is one such example of a cryptocurrency that is linked at a 1:1 ratio with the US dollar.
In the crypto space, there exists a host of different stablecoins and each of these coins will have its own reputation, trading fees, transfer speed, and even some unique features. But even in such a varied arrangement of crypto’s, BUSD stands out as a popular stablecoin, offering its own unique reputation, services, low transaction fees, and stringent regulatory cohesion.
Binance USD Use Case: Regulatory Cohesion
In the dynamic market that is crypto, certain stablecoins have found themselves falling into hot water, often due to bad faith actors, unregulated providers of liquidity, and some intense regulatory pressures. BUSD however maintains some fascinating use cases that show itself to have better internal structures and regulatory cohesion that indicate that it may well be the more ‘stable’ of the stablecoins.
Rumors of regulatory changes are often enough to move the market in cryptocurrency and some countries have outright banned or restricted crypto usage. Therefore it is becoming increasingly necessary for some cryptocurrencies to fall into greater states of cohesion with regulatory bodies.
BUSD is one such stablecoin and as such enjoys host benefits that form a significant portion of its use case. For example, BUSD is one of the few stablecoins that is considered to be in line with the rather strict NYDFS (New York State of Finchel Services) regulatory standards.
This close adherence to regulatory standards grants the BUSD a strong reputation amongst financial services and businesses. Reputation in cryptocurrency, like in most businesses goes a long way, and at the time of writing over 20 wallets and 36 exchanges offer the coin. In fact, some hotels have even begun to accept the coin as a form of payment for services.
Binance USD Use Case: Audits and Liquidity
A key element of BUSD’s strong reputation is the fact that it engages in monthly audits via a third party. That may not seem like much of a use case on the outside but upon further consideration, this fact does set the coin apart from its other stablecoin competitors. While regulation in some form does appear to be on the horizon for much of the crypto world, for better and for worse, some stablecoins have shown themselves to be less than reliable if not outright scams.
For a stablecoin, this is particularly dangerous, wildly affecting price stability. Considering that one of the key use cases and fundamental functions of a stablecoin is that it can provide users with a 1:1 level of liquidity and the appropriate amount USD if one was to request it.
However, it has been found that in some cases the ratio was likely not 1:1 and the problems with this are obvious and many. BUSD however consistently employs third-party audits thus approaching a degree of security and liquidity that encourage more users towards the stablecoin. Attracted by its strong reputation and secure liquidity provisions.
Binance USD Use Case: Interoperability and Reputation
Another interesting use case for BUSD and other well-provisioned stablecoins is their growing reputation for interoperability.
Essentially BUSD offers a high degree of interoperability for its users, acting as a ‘bridge’ between fiat currency and cryptocurrency. By creating a stable standard between fiat and crypto, businesses and individuals can take advantage of a host of benefits. Users and service providers can operate on a fiat pegged level but through crypto, linked directly in a cheap, disintermediated fashion. However, there have been certain barriers to cryptocurrency integration due to some reasons that have already been explored. Ergo reputation is proving to be a key component in the strive for cryptocurrency adoption through the use of stablecoins.
The New York financial system has long been considered to be somewhat hostile to cryptocurrency adoption, placing tough legislative hurdles up against the technology. However, in recent years there has been something of a change in this attitude and companies like Paxos have played a pivotal role in the discourse.
Paxos the New York-based FinTech brokerage company has aided BUSD both in its reputation and its potential for interoperability. By strictly adhering to some of the toughest regulatory standards Paxos has propelled BUSD in terms of its reputation, attracting business and users alike.
Binance USD Moving Forward
Cryptocurrency is moving into more and more new territories, both in business and in people’s daily lives, but certain aspects of financial technology have not proven to be easily adaptable. Stablecoins like BUSD, as long as they are well provisioned and effectively collateralized operate in this liminal fiat/crypto space, offering a chance to bring this stripe of FintTech to new and emerging markets.