[joyfylbanana]

I think what is interesting here is that they clearly don't have 1:1 USDC reserves. And as their compliance has been questioned by many in the past might be that they might not be able to convert large amounts of BUSD to USDC, not at least cheaply.

[madsbuch]

They do, Both USDC and BUSD are backed by actual dollars. Ie.

1. Burn 1 BUSD

2. Withdraw that 1 dollar

3. Deposit it with the USDC account

4. Mint one USDC

However, that requires that banks are open.

[nailer]

Binance replacing USDC with BUSD is not having USDC reserves. If Binance had USDC reserves they would not need to burn BUSD, mint USDC or require banks to be open. Because Binance already would hold the USDC.

Likewise if something happened to the value of BUSD, it should be fine, because you hold USDC. Except you don't because Binance replaced the coins they were supposedly holding in custody for you.

[madsbuch]

1. It was said that Binance treats BUSD and USDC as the same currency 2. It was said that there is a high number of USDC withdrawals

    If Binance had USDC reserves they would not need to burn BUSD

Well, if they didn't provide the service of treating the currencies as the same, they would have been able to fully cover. However, they do, so it is expected that they need to convert. All in all, it seems perfectly natural what they do.

[nailer]

> It was said that Binance treats BUSD and USDC as the same currency

Yes, that is a mistake, trust in Circle is not the same as trust in binance

> service of treating the currencies as the same

Replacing customer’s investments is not a service, particularly if it makes it more difficult to withdraw the currency.

[jacquesm]

This is all predicated on them having the money in the first place. That may well not be the case.

[joyfylbanana]

Probably not dollars, but some kind of low-risk assets like USD bonds? In that case you also can't just withdraw dollars, you have to sell the bonds - if they have to convert large amount like hundreds of millions, the spread on those bonds might get larger.

Also even though it were just dollars in a regular bank account, when the amounts go large enough, the bank might have liquidity issues of their own.

What would be the biggest issue is the compliance. As rumours are circulating that Binance might be getting some kind of charges, the banks and other institutions might just stop doing business with them because that would increase their risk a lot.

[vgatherps]

IIRC BUSD is whitelabeled from Paxos so it would probably be fine in the case of Binance troubles.

100MM isn't nothing, but it's very much moveable. Bond markets trade absolutely massive size. Even hen you could tell people "hey, you can't get your USDC, but we're trading out of positions over the next two weeks". Sucks but drastically different than an FTX situation.

[nailer]

It's kinda both a Paxos product and not:

https://paxos.com/busd/

> It is important to understand the distinction between BUSD and Binance-Peg BUSD. These are two different products. Binance USD (BUSD) is a regulated, fiat-backed stablecoin pegged to the US dollar. The Paxos-issued BUSD stablecoin, as well as its reserves, are subject to strict regulatory oversight by the New York Department of Financial Services. BUSD is backed by reserves held in either or both (i) fiat cash in dedicated omnibus accounts at insured U.S. banks and/or (ii) U.S. Treasury bills (including through repurchase agreements and/or money-market funds invested in U.S. Treasury bills).

> Binance-Peg BUSD, which is not issued by Paxos and is not regulated by NYDFS, is a separate product. Binance independently mints Binance-Peg BUSD on other blockchains (e.g., BNB Chain, Polygon and Avalanche) and pegs the tokens to BUSD on a one-to-one basis. This allows holders of both tokens to swap tokens between Ethereum and other blockchains.