Bank of America Says Binance to Benefit from Increased Supply of Its Own Stablecoin
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Bank of America (BAC) has Talked about the subject The recent decision of the Binance exchange to convert all current user balances and future deposits of the three stablecoins USD coin (USDC), trueUSD (TUSD) and pax dollar (USDP) into native Binance USD (BUSD).
On Friday, the bank released its research report, which noted that while Binance’s move may generate limited additional revenue for the exchange in the short term, it could have broader implications in the long term.
The bank said that the automatic conversion could increase the supply of BUSD by up to $908 million, as 1% ($10 million) of the supply of USDP and 2% ($898 million) of the supply of USDC are on Binance.
Bank of America admitted that the fact that BUSD has a market capitalization of 19 billion shows that the stablecoin is not regularly used in the wider crypto-ecosystem and is therefore not useful.
However, the bank sees the potential for more BUSD supply growth in the long term as customers become familiar with the stablecoin and its applications across the ecosystem and add support to it to gain more users.
According to Bank of America, Binance will benefit from this growing supply as it will be able to invest additional funds backing stablecoins into cash assets such as US Treasuries and Treasury-backed overnight loans to generate interest income.
On the other hand, the bank said that while the effects on USDC are limited, the stablecoin has the potential to increase its market share relative to Tether (USDT). This is because Binance users are more likely to convert BUSD to USDC than USDT when withdrawing funds.
Tether (USDT), the largest stablecoin by market capitalization, was excluded from the automatic conversion. The USDC stablecoin has a market capitalization of just under $52 billion, followed by BUSD at $19.5 billion.
Market leader Tether (USDT) has a market capitalization of $67 billion and is still traded on Binance.
Questioning Binance’s Move
Bank of America joins other stakeholders who have recently raised questions about Binance’s decision to stop supporting USDC and other stablecoins on its platform.
Binance announced on Monday that it will convert customer holdings of three competing stablecoins – USDC, Pax Dollar (USDP) and True USD (TUSD) – to BUSD on September 29. As a result, it would eliminate spot, futures and margins. trade with USDC, USDP and TUSD pairs.
Binance said the decision was to “increase user liquidity and capital efficiency.” The news was met with skepticism, however, as some users blamed the decision to convert rival stablecoins into Binance stablecoins.
Concerns have been raised about Binance’s potential monopolistic behavior of sidelining other stablecoins to promote their own.
But Circle CEO Jeremy Allaire recently backed Binance’s decision, saying the new move will help USDC become the market’s most popular stablecoin for moving funds between centralized exchanges (CEX) and decentralized exchanges (DEX).
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