Binance, the world’s largest cryptocurrency exchange, has been exploring the possibility of issuing stablecoins not pegged to the US dollar. After US regulators ordered Paxos, a crypto firm that issues Binance’s stablecoin Binance USD (BUSD), to stop minting BUSD, Binance CEO Changpeng Zhao tweeted that the exchange is exploring other issuers and non-USD based stablecoins.
Patrick Hillmann, Binance’s chief strategy officer, recently revealed that the exchange has received notable interest from potential partners, both private and public, for collaborating on launching a non-dollar stablecoin.
“There are very interesting opportunities, particularly in Europe and the Middle East,” Hillmann said in an interview with Forbes. However, there are concerns that such a pivot may prove to be difficult, as stablecoins not pegged to the US dollar might hardly find significant adoption.
The largest non-dollar fiat-backed stablecoin currently available is the Euro Tether (EURT), with a market capitalization of $220 million, compared to Tether (USDT), which is dollar-pegged and has a market cap of over $70 billion. Nonetheless, the recent regulatory scrutiny on USD-based stablecoins creates opportunities for non-USD stablecoins, with Binance being a relevant player in the stablecoin space.
Regulatory Hurdles in Launching Non-USD Stablecoins
Despite the potential for non-USD stablecoins, there are regulatory hurdles to consider. According to Kevin Zhang, cofounder of DFX Finance, a decentralized finance protocol for non-U.S. dollar stablecoins, regulations have delayed the prevalence of non-USD stablecoins. Stablecoin issuers are looking for ways to get regulated properly without making numerous assumptions and spending insane amounts of money on lawyers to provide opinions. Nonetheless, the recent regulatory hostility towards USD-based stablecoins could create a more welcoming environment for non-USD stablecoins.
Binance’s Troubles in the US
Binance is not only facing regulatory scrutiny over its stablecoins but is also struggling in the US. The exchange’s banking partner, Signature Bank, raised transaction minimums for dollar transfers last month, announcing that it would only process trades by users with USD bank accounts over $100,000. Binance also announced that it is temporarily suspending US dollar withdrawals and deposits for international customers. Furthermore, US authorities have sent subpoenas to American hedge funds and market-making companies dealing with Binance, asking for records of their communications with the exchange.
The regulatory hurdles in launching non-USD stablecoins are not insurmountable, as Binance and other crypto firms continue to explore potential partners for launching stablecoins not pegged to the US dollar. The recent regulatory hostility towards USD-based stablecoins creates opportunities for non-USD stablecoins, which can be a more welcoming environment for innovation in the stablecoin space. However, it is worth noting that the challenges facing Binance in the US, which include regulatory scrutiny and banking restrictions, may impact the exchange’s ability to launch non-USD stablecoins.