Cryptocurrency exchange Binance has announced the auto-conversion of stabelcoins. What does this mean for traders?
Binance, the largest cryptocurrency exchange, is preparing a springboard for its Binance USD (BUSD) token to conquer the stablockoin market. The fact is that the day before the platform announced the auto-conversion of USDC, USDP and TUSD to BUSD, with trading in pairs of these coins to be discontinued. Binance’s official motivation is to improve liquidity and customer money management efficiency. The largest stabelcoin of the market, USDT, will not be removed, although there was a hint that things could change in the future. We tell you more about what’s going on.
How to trade on Binance
Among the sanctioned exchanges is USDC, which is the largest stackablecoin with a market capitalisation of $51 billion. In comparison, BUSD’s capitalisation fluctuates around $19 billion. The auto-conversion announcement was accompanied by the following quote.
This will not affect users’ withdrawal choices: users will still be able to withdraw funds in USDC, USDP and TUSD at a ratio of 1:1 to their BUSD-denominated account balance.
Accordingly, users will be able to use the same USDC within the exchange, but the coins will be converted to BUSD before transactions are made. Trading in USDC pairs is not possible directly.
Top 10 stabelcoins on the market by capitalisation
The procedure itself will take place on September 29 at 6:00am Moscow time. Traders can also perform manual auto-conversion before that date, starting on September 26, also starting at 6:00am Moscow time. The minimum amount of funds for manual conversion is $1 in convertible stabelcoin equivalent.
Binance removes trading pairs with stabelcoins
Binance will also delist the trading pairs of the aforementioned stabelcoins with BUSD and other altcoins. The auto-conversion process could last up to a day, during which time the exchange advises customers not to increase the collateral of already open futures positions in pairs of convertible stablcoins. The announcement below includes a recommendation to close positions altogether, just in case, though the exchange will do so automatically during auto-conversion.
The following altcoin stablcoin pairs will also be removed
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So why is Binance doing all this? Firstly, it will improve liquidity, as the same volume of cryptocurrency will now be “spread out” between fewer trading pairs. Consequently, traders will get better deal terms and better chances of getting coins at the required rate. Secondly, it is getting rid of competitors for its own stabelcoin, although not all of them.
According to Cointelegraph’s sources, the market’s most popular stablecoin USDT is not on the exchange’s list of assets for auto-conversion. A Binance official said so in an interview with reporters, but he also hinted that the site’s position on USDT could change in the future.
We have no plans to auto-convert USDT to BUSD right now, but things may change.
According to him, the auto-conversion procedure “is not a temporary measure” and the exchange will only expand such programs in the future. Notably, the news has raised a lot of questions in the cryptocurrency community, and Binance CEO Changpen Zhao has already had time to comment on it. He posted the following message on his Twitter account.
We will not be delisting Stablecoin. You will still be able to make a deposit in USDC and withdraw the coins. It’s just that the liquidity will be combined in one trading pair. Best price with minimum slippage for users.
Recall, slippage is the difference between the desired and actual transaction price of a user's crypto-asset. This parameter can be manually set on various AMM exchanges like Uniswap. The greater the slippage, the greater the chance of making a trade.
That is, if you have USDC or other stabelcoins, mentioned in Binance announcement, you will still be free to make a deposit in them on the exchange. But in this case, coins will be automatically converted into BUSD, and trades will be executed just with BUSD. If you need to withdraw USDC, the platform will convert them to the desired purse at 1:1 to BUSD ratio.
By the way, the number of large USDC holders has been decreasing lately. Previously, we wrote that this trend is related to reputational issues - in particular, the attitude of stablocoin issuer Circle to the US government sanctions against cryptomixer Tornado Cash. The company has blocked addresses that have interacted with the platform, and it has done so without direct instruction from the authorities.
Circle chief executive Jeremy Allaire, however, believes that in this situation the possibilities for USDC applications have expanded – and that’s a good sign. According to him, a similar feature already exists on FTX and Coinbase.
Dollars
We believe that the attitude to such a move by Binance's management can be different. On the one hand, traders will get better liquidity due to the concentration of assets in fewer trading pairs. On the other hand, such a ban on interaction with USDC is another reminder that centralized platforms will always act in their own interests, despite the position of some users. Therefore it is possible that in the future the interests of clients could be infringed upon once again. So the latter, if anything, need to be prepared for this.
More about other interesting news can be found in our millionaires’ cryptochat. There we will discuss other important developments from the world of blockchain and decentralisation.
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