The crypto exchange giant Binance’s BUSD stablecoin has been experiencing a decline recently due to mismanagement issues involving the exchange’s pegged tokens.
According to CoinGecko, the circulating supply of BUSD fell to $15.4 billion on Wednesday, which is a reduction of $1 billion over the past week and $2 billion in a month.
BUSD’s decline comes from $22 billion in early December when users scrambled to withdraw funds from Binance after it botched a report about its digital asset reserves.
BUSD is a dollar-pegged stablecoin issued by the New York-based fintech firm Paxos Trust under the Binance brand, backed by cash and U.S. Treasury bill reserves.
Traders use stablecoins as an intermediary to convert traditional fiat money to digital assets and facilitate trading cryptocurrencies.
The recent decline comes amid reports about errors involving the exchange’s wrapped token derivatives, known as Binance-peg tokens.
Earlier this month, blockchain research firm ChainArgos found that Binance-peg BUSD was not always fully backed by reserves during 2020 and 2021. Binance acknowledged the breach and said it has fixed them.
This week, Bloomberg reported that the exchange mixed customer funds with the collateral of Binance-peg tokens.
In addition to these issues, Binance’s banking partner Signature Bank will halt transfers smaller than $100,000 using the SWIFT interbank messaging system starting February 1st.
These recent issues have resulted in BUSD falling behind stablecoin rivals in the competitive market. BUSD lost 11.3% of its market capitalization in a month, while USDT gained 1.3% and USDC dropped just 1.9%, according to data from DefiLlama, which tracks digital assets’ performances.
Despite this, BUSD is the only one of the top three stablecoins that grew its market value over the past year.
