Who issues Binance USD (BUSD)?
BUSD is issued by Binance in partnership with Paxos. Paxos is a financial technology company based in New York that issues Binance USD (BUSD), a stablecoin that is pegged to the value of the US dollar. BUSD is issued by Paxos in a process called "minting". To mint BUSD, Paxos will hold an equivalent amount of US dollars in reserve and then issue a corresponding number of BUSD tokens. These tokens can then be traded on cryptocurrency exchanges, with each token representing one US dollar.
To "redeem" BUSD, holders can exchange their BUSD tokens for the equivalent amount of US dollars held in reserve by Paxos. This process ensures that the value of BUSD remains stable, as it is always backed by an equivalent amount of US dollars. Paxos is a regulated company, and BUSD is subject to regular audits to ensure that it is fully collateralized (backed by enough US dollars to support its market cap). This provides assurance to users that their BUSD tokens can be redeemed for US dollars at any time.
BUSD Wells Notice by the SEC
Paxos has been ordered by regulators to stop issuing Binance's dollar-pegged stablecoin, BUSD, which is the world's third largest stablecoin, with a market cap of more than $16 billion as of Monday 13th of February. The company was facing a lawsuit from the SEC for offering an unregistered security, and as a result, Paxos will stop minting BUSD next week under guidance from the New York Department of Financial Services.
This news increases the risk for users who choose to hold BUSD, as the regulatory crackdown on the crypto market is quickly tightening. Regulators are now focusing on the crypto market after FTX collapsed and Kraken agreed to end its "staking" program, which offered rewards if investors locked in their holding of certain digital assets.
Who issues Tether (USDT)?
The Tether (USDT) stablecoin is issued by Tether Limited, a company that provides blockchain-based financial services. Tether Limited is incorporated in the British Virgin Islands, and it is not a regulated entity in the United States.
However, Tether Limited has entered into partnerships with various financial institutions in the United States, such as Deltec Bank & Trust Limited, to provide services to US customers. These partnerships may be subject to certain regulatory requirements in the US, but Tether Limited itself is not directly regulated by any US regulatory agencies.
BUSD and USDT Adoption in DeFi
USDT arguably has greater adoption throughout decentralized finance (DeFi) protocols across Ethereum, Polygon, Avalanche and all non-Binance Smart Chain networks. Tether (USDT) serves as the backbone of liquidity for key DeFi legos including the Curve Finance and Convex Finance ecosystems.
USDT has more Total Value Locked and a greater overall market capitalization in the market, which suggests it has greater adoption in decentralized and centralized finance. You can get more granular data about stablecoins and their liquidity across various chains on Defillama Stablecoins.
Final Thoughts: BUSD or USDT?
In summary, both BUSD and USDT are stablecoins that are pegged to the US dollar, used on crypto exchanges to trade cryptocurrencies without the volatility. However, they have differences in the issuing entity, market cap, collateralization, and regulatory compliance. BUSD is fully collateralized and subject to regular audits by third-party firms, while USDT is partially collateralized and not subject to regular audits.
Additionally, BUSD has recently received a Wells Notice from the SEC, which increases the risk for users who hold it. USDT arguably has greater adoption throughout decentralized finance protocols and a greater overall market capitalization. Ultimately, the choice between BUSD and USDT depends on individual needs and preferences.