According to the cryptocurrency exchange, there was a “timing mismatch in backing Binance-Peg BUSD with BUSD,” which appeared to show data in which the stablecoin was not fully backed.
Major crypto exchange Binance initially pushed back against a Bloomberg report that its Binance-Peg BUSD stablecoin “doesn’t always appear to have been completely backed by BUSD”.
Binance stated in a blog post on Jan. 10 that the report was based on a “timing mismatch in backing Binance-Peg BUSD with BUSD,” which was later amended to clarify the difference between a pegged and backed stablecoin. According to ChainArgo co-founder Jonathan Reiter’s analysis, the Binance-pegged BUSD was frequently undercollateralized between 2020 and 2021, with a gap that sometimes exceeded $1 billion.
The Binance USD (BUSD) stablecoin, on the other hand, was “fully backed by USD cash and cash-equivalent reserves,” and the Binance-Peg BUSD was fully backed by BUSD. The reported mismatch appeared to show data in which the stablecoin was not always fully backed.
“Despite data variances, user redemptions were never impacted,” Binance said. “There is also no effect on BUSD on Paxos’ ERC-20, which is regulated by the NYDFS, audited monthly, and backed by USD cash and cash-equivalent reserves.”
Following the demise of Terraform Labs and its TerraUSD token — now TerraClassicUSD — regulators and media outlets appear to have shifted their focus to stablecoins. The crypto platform was one of the first to fail in 2022, joining Voyager Digital, Celsius Network, BlockFi, and FTX in a string of bankruptcies and failures that affected thousands, if not millions, of crypto users.
Tether, one of the largest stablecoins by market capitalization, came under fire in 2019 for similar allegations that its USDT tokens were not fully backed. A US judge ordered Tether to provide evidence that its USDT was backed 1:1 in September. Bitfinex and Tether also agreed to pay $18.5 million to the Office of the New York Attorney General in 2021 for misrepresenting the degree to which USDT was backed.
