From BUSD to USDC: Why Binance changed its stablecoin strategy

Binance deepens its bet on USDC

Binance has taken a $100 million stake in Circle as part of an expanded five-year commercial agreement centered on USDC. The exchange will promote the stablecoin across its global platform, particularly in emerging markets, while Circle will provide the infrastructure supporting its use.

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The investment goes considerably further than simply adding another stablecoin to Binance. The exchange bought about 1.24 million Circle shares and generally cannot sell or hedge them for up to two years. Circle will also pay Binance monthly incentives linked to USDC held through its wallet infrastructure.

“Circle has earned its place as one of the most credible issuers in the world, spanning USDC, Arc, and the infrastructure reshaping how value moves across borders,” Binance co-CEO Richard Teng said.

When Binance had a stablecoin of its own

The relationship between Binance and USDC looked almost opposite four years ago. In September 2022, Binance announced that existing user balances of USDC and several other stablecoins would automatically be converted into BUSD.

The exchange said concentrating trading around fewer stablecoins would improve liquidity and capital efficiency. It also gave BUSD a powerful position inside the world’s largest crypto exchange. Launched in 2019 in partnership with Paxos, BUSD eventually grew to more than $20 billion in circulation and became one of the largest stablecoins on the market.

But although BUSD carried Binance’s name, Paxos was the company that actually issued the token and held the reserves behind it. Binance could generate demand and liquidity for BUSD, but it did not control its issuance or the reserves behind it.

How BUSD unraveled

That distinction became crucial in February 2023, when the New York Department of Financial Services ordered Paxos to stop minting new BUSD. Paxos subsequently ended its relationship with Binance over the token, while existing BUSD remained redeemable as its supply began to shrink.

Binance could not simply take over issuance. A dollar stablecoin needs reserves, banking relationships and redemption infrastructure, all of which sit alongside a growing set of regulatory obligations. Without Paxos issuing new tokens, BUSD had no path to continue expanding.

Binance gradually wound down support and directed users toward alternatives. One of them was First Digital USD, or FDUSD, issued by First Digital rather than Binance. The exchange supported its growth with measures including zero-fee trading pairs, but FDUSD never recreated the scale or market position BUSD had reached.

Why not create BUSD 2.0?

Stablecoin issuance has only become more demanding since BUSD disappeared. The U.S. established a federal framework for payment stablecoins with the GENIUS Act in 2025, while Europe introduced rules for stablecoin issuers under MiCA. Other jurisdictions have also been developing requirements covering reserves, redemptions and supervision.

That makes recreating BUSD more complicated than simply launching another token. A new Binance-branded stablecoin would require the exchange either to take on much more of the regulated issuance business itself or once again rely on an outside company for the reserves, redemptions and banking relationships behind a product carrying its name.

Circle already operates that machinery at scale. Binance, meanwhile, has something a stablecoin issuer needs just as much: distribution. Its exchange, wallets and other products can put a digital dollar in front of a huge global audience without Binance having to manage the reserves behind it.

The new agreement turns that division of roles into a business model. Binance can use its platform to expand USDC adoption and receive incentives tied to balances held through its infrastructure. Its Circle stake also gives it a financial interest in the issuer’s growth, without requiring the exchange to rebuild the stablecoin operation it lost with BUSD.

From rival to shareholder

None of this means Binance has abandoned other stablecoins. The exchange continues to support USDT, FDUSD and other dollar tokens, and having several liquid stablecoins remains useful for a global trading platform.

But the contrast with 2022 is striking. Binance once tried to concentrate users around a stablecoin bearing its own name and automatically converted USDC balances into BUSD. It is now a shareholder in USDC’s issuer and has committed five years to helping expand the token.

The experience with BUSD may have shown that Binance does not need to create the digital dollar to profit from its growth. It can bring the users and liquidity while leaving the increasingly complicated business of issuing that dollar to someone else.

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