Tether USDT Gains $1B as Paxos Burns Over $1.8B of BUSD

Tether’s USDT, the largest stablecoin by circulating supply, has gained some $1 billion in market capitalization as crypto investors flee rival Binance USD (BUSD), which fell under regulatory scrutiny earlier this week.

USDT’s market cap has grown to $69.5 billion from $68.5 billion since Monday, according to cryptocurrency price tracker CoinGecko. This is the highest since last June’s crypto market turmoil, when traders placed bets on Tether’s demise.

Tether’s recent gains come as BUSD, which is issued by Paxos under the exchange giant Binance’s brand, has been rapidly shrinking.

Blockchain data by crypto intelligence firm Nansen shows that Paxos has burned more than $1.8 billion worth of BUSD since Monday morning.

The market capitalization of BUSD has fallen to $14.3 billion from $16.1 billion during this period, representing a 11% decline, CoinGecko data shows.

The $136 billion stablecoin market is in the midst of a shake-up as U.S. regulators ratchet up the pressure on Paxos and BUSD, the third largest stablecoin.

On Monday, Paxos announced that it would stop minting BUSD after Feb. 21, citing orders from the New York Department of Financial Services (NYDFS). Meanwhile, the U.S. Securities and Exchange Commision (SEC) is preparing to sue the firm for issuing unregistered securities, CoinDesk reported earlier this week.

While Paxos’ other stablecoin, the seventh largest Paxos Dollar (USDP), has avoided the regulators’ probing, the token still has experienced some $100 million of net redemptions, culminating in a 11% decrease in supply.

Stablecoins are a type of cryptocurrency whose price is fixed to an external asset, usually the U.S. dollar. If demand falters for a stablecoin, issuers decrease the supply by removing tokens from circulation, also called burning, to keep the price peg.

Other large cap stablecoins such as Circle’s USDC and MakerDAO’s DAI haven’t budged, indicating that investors have flocked to USDT from BUSD or sold their holdings for fiat money and other digital assets.

Conor Ryder, digital asset research firm Kaiko’s analyst, told CoinDesk earlier this week that Tether was poised to be a “clear winner” of the stablecoin market’s reshuffling.