In the crypto world, what truly determines victory is never code, but the interplay of liquidity, power, and regulation. The rise and fall of BUSD is not just the tragic history of a single stablecoin, but a financial war about how an exchange attempted to "unify the world."
When BUSD was pushed onto the historical stage, it carried not only a compliance narrative but also Binance's ambition to reshape the stablecoin order through coercive measures—forcing exchange rates and merging trading pairs to absorb the depth of competitors directly into its own ledger.
The "automatic conversion" in 2022 was a textbook blitzkrieg; while the regulatory hammer on Valentine's Day 2023 caused this seemingly impregnable empire to collapse instantly. The twin BUSDs, the shadowy Binance-Peg, and the blurred regulatory boundaries together constituted its Achilles' heel.
But the story does not end here.
From FDUSD to BFUSD, and then to United Stables ($U), Binance did not give up on stablecoins but evolved from its failures, shifting from hegemonic unification to aggregated absorption, even paving the way for the AI economy in advance.
This is an article about stablecoins, but even more so, it is a business documentary about how exchange power attempted to tame the market and was counterattacked by regulation.
Chapter 1: Zeal and Hegemony—The "Unification" Story of BUSD
The story of BUSD is not just the rise and fall of a compliant product but also a tale of "imperial tactics" about how an exchange attempted to unify market liquidity through administrative means.
1.1 Humble Beginnings: The Dinner Between CZ and Richmond Teo
In 2019, the stablecoin market was Tether's wild west. At this time, Richmond Teo, as the co-founder of Paxos and CEO of Asia, became a key bridge connecting New York regulators with Asian crypto giants.
An industry rumor, seemingly false yet widely believed, circulated: Shortly before the launch of BUSD, after Paxos published a blog post celebrating its compliant status, Rich Teo and CZ were spotted dining together at an upscale overseas restaurant. After that dinner, the situation changed dramatically: Huobi's HUSD gradually fell out of favor, and Paxos solidified its position as the "full-time custodian" of BUSD. CZ entrusted Binance's liquidity backbone to Teo, while Teo used the New York State Department of Financial Services (NYDFS) "green list" license to equip Binance with a bulletproof vest.
1.2 The Zealous Moment: The 2022 "Exchange Rate Unification Blitz"
The most "zealous" and controversial moment in BUSD's history occurred in September 2022. To challenge the dominance of USDT and USDC, Binance launched a stunning "liquidity unification" operation.
Binance announced that it would automatically convert existing user balances and newly deposited USDC, USDP (Paxos Dollar), and TUSD (TrueUSD) into BUSD at a 1:1 ratio.
Binance directly removed spot trading pairs for USDC, USDP, and TUSD. This meant that on Binance, the world's largest liquidity pool, users could deposit USDC but would only see and use BUSD on their accounts. (However, they could withdraw USDT or USDC.)
This was a blatant strategy. By forcibly merging liquidity, BUSD instantly gained the trading depth that originally belonged to its competitors. Although Circle (the issuer of USDC) CEO Jeremy Allaire stated on Twitter that this helped increase dollar liquidity, the brand presence of USDC in the Binance ecosystem was forcibly erased, becoming "fuel" for BUSD.
This aggressive strategy was highly effective. BUSD's market capitalization soared to a historical peak of $23 billion in November 2022, once occupying half of the trading volume on centralized exchanges. That was BUSD's most glorious moment and the peak of Binance's ambition to establish an independent financial闭环 (closed loop).
1.3 The Regulatory "Valentine's Day Massacre"
However, this "unification" came to an abrupt end on February 13, 2023. The NYDFS pointed out that the "Binance-Peg BUSD" (a shadow version issued for use on BNB Chain) issued by Binance exceeded Paxos's regulatory scope and ordered a halt to its minting. BUSD's market capitalization plummeted from its peak of $23 billion to nearly zero. The empire built through "automatic conversion" collapsed under the regulatory hammer.
For Teo, this was undoubtedly a heavy blow. As the architect, he watched as the "child" he and CZ had raised together was forcibly euthanized. Paxos was forced to announce the severance of its relationship with Binance, and Teo subsequently entered a low-profile period lasting over a year.
However, the story did not end there. Rich Teo's high-profile return in the Trump family's crypto project, World Liberty Financial (WLFI), is seen as a continuation of his story with CZ. Teo is leveraging new political capital to build a new compliant stablecoin (USD1), and WLFI deeply relies on BNB Chain's liquidity. This seems to be a more subtle and迂回 (roundabout) way for the two old friends to continue their "liquidity alliance" in the cracks of regulation.
Chapter 2: The Achilles' Heel—The "Twins" and Regulatory Thunder
2.1 The Fatal Structural Flaw: Binance-Peg BUSD
Behind BUSD's glory lay a structural hidden flaw that ultimately led to its destruction. In fact, there were two截然不同 (distinctly different) forms of BUSD circulating in the market:
- BUSD issued by Paxos (ERC-20): This was the real "compliant BUSD," issued by Paxos on the Ethereum blockchain, directly regulated by NYDFS, with reserves strictly held in segregated U.S. accounts.
- Binance-Peg BUSD (BEP-20, etc.): This was a "wrapped token" created by Binance to extend its ecosystem to non-Ethereum chains (like BNB Chain, Polygon, Avalanche).
In theory, the mechanism of Binance-Peg BUSD was: Binance would lock 1 Paxos BUSD on Ethereum, then mint 1 Binance-Peg BUSD on BNB Chain. However, this "bridging" mechanism relied entirely on Binance's internal operations, not direct management by Paxos. NYDFS's regulatory authority and the "green list" only covered Paxos BUSD on Ethereum, not Binance-Peg BUSD.
The breaking point was the disconnect in reserve management. Investigations by media outlets like Bloomberg revealed that during certain periods from 2020 to 2021, the wallets backing Binance-Peg BUSD experienced severe "undercollateralization," with gaps reaching up to $1 billion at one point. Although Binance claimed this was merely an "operational delay" and not a solvency issue, it directly violated the regulators' bottom line: a stablecoin flying the flag of "NYDFS regulated" had spawned an unregulated "shadow version" with messy reserve management.
2.2 The Regulatory Hammer: The 2023 "Valentine's Day Massacre"
BUSD's fate came to an abrupt halt on February 13, 2023. On this day, the New York State Department of Financial Services (NYDFS) issued an administrative order demanding that Paxos immediately stop minting new BUSD tokens.
The regulator's理由 (reasoning) was clear and致命 (fatal): Paxos had failed to effectively supervise its relationship with Binance, particularly regarding the issuance of Binance-Peg BUSD, which allowed the compliant BUSD to be used as backing for unauthorized derivatives. The NYDFS explicitly stated: "While we authorized BUSD on Ethereum, we never authorized Binance-Peg BUSD."
Simultaneously, the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos, alleging that BUSD constituted an "unregistered security." The logic behind this accusation was that BUSD was not just a payment tool; it was part of Binance's ecosystem profit mechanism (through products like Earn), thus potentially constituting an investment contract. Although the SEC later dropped this specific investigation in July 2024, the dual blow at the time was already致命 enough (fatal enough).
2.3 Fall and Retreat
"Ceasing minting" meant BUSD became a "zombie token" that could only be redeemed, not newly issued. For an asset intended to be a liquidity medium, this was a death sentence. As Paxos announced the termination of its partnership with Binance, BUSD's market capitalization began a free fall. Within days, billions of dollars flowed out; within a year, its market cap shrunk by over 90%.
Binance was forced into a painful retreat:
- Delisting Trading Pairs: Gradually removing BUSD spot and leverage trading pairs.
- Ceasing as Margin: Announcing BUSD would no longer serve as a margin asset for contract trading.
- Forced Conversion: Urging users to convert BUSD to other stablecoins (e.g., FDUSD).
The once "zealous" stablecoin empire collapsed under the regulatory hammer. Binance lost a stablecoin trump card and was forced to rethink its stablecoin strategy.
Chapter 3: The Transition Vacuum and the Emergence of FDUSD & BFUSD
In the initial period after BUSD's fall, Binance faced reluctance to let go of its "own stablecoin" revenue—why should this profit be handed over to others? To fill this void, Binance quickly promoted First Digital USD (FDUSD), a stablecoin issued by Hong Kong's First Digital Labs.
Binance's support for FDUSD almost replicated the strategy used to promote BUSD back in the day:
- Launching "zero fee" activities for FDUSD trading pairs.
- Offering 1:1 lossless conversion from BUSD to FDUSD.
- Including FDUSD as a farming option in Launchpool.
However, FDUSD was more of a strategic buffer. While it addressed the shift in compliance location (from the U.S. to Hong Kong), it was still a traditional, centralized, third-party issued stablecoin. It did not solve the core problem: if regulators targeted the issuer again, Binance would still be passive. Furthermore, in a high-interest rate environment of up to 5%, the model of FDUSD (and USDT/USDC) meant the issuer earned all the interest, while users got nothing. This was already outdated in the DeFi era.
The era for new stablecoins had also passed. FDUSD's primary use case originally was participating in Launchpool. As Launchpool activities sharply decreased, FDUSD's utility value also diminished. Coupled with the丑闻 (scandal) involving Justin Sun in April 2025, the growth of FDUSD faced challenges.
To counter competitors' "contract position yield" features, BFUSD (Binance Futures USD) emerged.
Binance repeatedly emphasized that BFUSD is a "reward-based margin asset," not a true stablecoin.
Users holding BFUSD can earn 4-5% APY. The yield comes from a "Delta hedging" strategy.
BFUSD cannot be withdrawn; it can only be used as margin in Binance's contract accounts. It is Binance's "internal circulation" weapon, ensuring that even in a bear market, users do not transfer funds out of the exchange. It is an asset appreciation financial product disguised as a "stablecoin." Although BFUSD has also achieved considerable success (currently with an issuance of 1.8 billion), Binance also knows that a stablecoin that cannot leave the exchange is merely play money (欢乐豆).
Chapter 4: United Stables ($U)—The "Surprise" and New Landscape It Brings
If BUSD represented "exclusive" hegemony and BFUSD was "internal" defense, then the newly launched United Stables ($U) brings a completely different surprise: "compatibility" and "the future."
4.1 No Longer "Reinventing the Wheel," but "Absorbing the Wheel"
Unlike the BUSD era's attempt to eliminate USDC, $U adopts a "meta-stablecoin" strategy.
$U is backed by a basket of assets. According to the release information on December 18, 2025, its reserves include USDT, USDC, and USD1.
It continues BUSD's unification strategy. Whether it's USDC, USDT, USD1, or USD, they all become the underlying assets of $U, but对外呈现时是U (externally presented as U). By吸纳 (absorbing) the liquidity-fragmented USDT and USDC into $U's reserve pool, United Stables attempts to algorithmically "unify" these assets on BNB Chain, issuing the most liquid $U, somewhat analogous to curveUSD. U is the unified称谓 (designation) for these stablecoins, but users can choose other stablecoins when withdrawing/redeeming.
This is a higher-dimensional strike—since the dollar I issue you dare not use, I will package the dollars you dare use into my token.
4.2 Surprise Two: Foreshadowing, the Trump Concept Coin USD1 Enters the Game
The strategic surprise of United Stables also lies in including USD1 as a reserve asset. (This is the stablecoin issued by the Trump family's crypto project, World Liberty Financial (WLFI), whose stablecoin负责人 (head) is none other than BUSD's old architect, Richmond Teo. One wonders if this relationship was a factor?)
After all, USD1's size is several magnitudes smaller than USDC and USDT. This support, from an external view, seems more like a political投名状 (letter of commitment/pledge of allegiance). It is foreseeable that United Stables provides a huge use case for USD1 (as $U's underlying asset), given that USD1's current usage scenarios are still quite limited.
4.3 Surprise Three: Currency Born for AI (The AI Economy)
United Stables explicitly states that $U is "designed for the AI economy."
As stated in United Stables' tweet:
EIP-3009 (Gasless Authorization): Allows for "gasless transfers." This means future AI agents (Bots) conducting high-frequency micropayments do not need to hold BNB or ETH for gas fees. This solves the biggest pain point in machine-to-machine (M2M) economics.
x402 Delegated Execution: A standard that allows smart contracts to automatically execute fund transfers based on specific conditions. This paves the way for future "autonomous hedge funds" or "supply chain automatic payment AIs."
As of the time of writing: U already has a circulating supply of 55 million. Is it a case of积累薄发 (accumulating strength for a major leap), or just a passing cloud?
https://x.com/UTechStables/status/2001667382444482708?s=20
Epilogue: How Far Has the Journey Been from "Hegemony" to "Great Unity"?
Looking back at the evolution from BUSD to United Stables, we see a惊人的 (astonishing) evolution in strategic thinking:
BUSD Era (Hegemony): Leveraged the exchange's monopoly position, used "automatic conversion" to forcibly eliminate opponents, pursued absolute market share. This approach, though "zealous," was also极易 (highly prone) to provoke joint counterattacks from regulators and competitors.
United Stables Era (Great Unity): Learned lessons, adopted an "aggregation" strategy instead. Acknowledged the status of USDT/USDC, but used $U to make them the underlying assets, positioning itself as the upper-layer "super application."
Planned ahead for AI payments,跳出 (jumped out of) the存量博弈 (stock game) of current human traders to seize the增量市场 (incremental market) of the future machine economy.
$U is not just a new aggregated stable token; it is also an attempt by BUSD, after being struck down by regulation, to redefine the stablecoin game rules using more tactful, sophisticated, and technologically forward-looking means. One can only say risks and opportunities coexist. Let's wait and see!
