In a surprising move, Binance, one of the leading crypto exchanges, has been exploring lesser-known and new stablecoins, deviating from its previous preference for BUSD. The recent comments made by Coinbase CEO Brian Armstrong during the second-quarter earnings call brought attention to this development.
Armstrong mentioned that Binance transferred some of its funds from USDC, the preferred stablecoin on Coinbase, to another stablecoin. Despite this shift, the market cap of USDC remained steady. The specific stablecoin Binance chose to hold its funds in remains undisclosed.
The Growing Appeal of FDUSD
On-chain data reveals that Binance has been converting USDC into United States dollars recently, leading many to speculate that the exchange is leaning towards a new stablecoin called First Digital USD (FDUSD). FDUSD, issued by a Hong Kong-based company, has been gaining traction since Binance introduced various trading pairs and attractive zero trading fees.
Binance’s History with Stablecoins
This is not the first time Binance has converted USDC to another stablecoin. Back in September 2022, the exchange had announced an auto-conversion of user-held USDC to Binance USD (BUSD), a stablecoin branded by Paxos Trust Company. However, the exchange did not clarify whether it intended to sell or convert its reserves to other stablecoins at that time.
Binance’s pursuit of alternative stablecoins began after the New York Department of Financial Services ordered Paxos to cease issuing the dollar-pegged BUSD stablecoin. In response, Binance turned to TrueUSD (TUSD) for its stablecoin needs, but TUSD faced depegging, and its issuance halted by June 10.
The Rise of FDUSD
With TUSD’s decline, Binance shifted its focus to FDUSD, another relatively obscure stablecoin. Issued by a company based in Hong Kong, FDUSD gained momentum following Binance’s introduction of several trading pairs and zero trading fees.
The rise of FDUSD caught the attention of Paolo Adriono, the chief technology officer of Tether, who noted the increased pressure on Tether and the heavy redemption of USDC, its main competitor. USDC, once considered a strong rival to market leader USDT, saw its market cap decrease by nearly half in the past year, plummeting from $44.5 billion to $26 billion.