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Facebook Taps Coinbase to Offer Custody Services for Novi Digital Wallet Rollout

On Tuesday, October 19, Facebook Inc announced that it has launched its new digital wallet for crypto assets called Novi and has hired Coinbase cryptocurrency exchange to be its custody partner.

According to the statement, Facebook is currently rolling out Novi digital wallet based on a small pilot program in The U.S. and Guatemala to allow users to trade the Paxos Dollar (USDP) stablecoin. The company said that the full rollout will enable people to send and receive money abroad instantly, securely, and with no fees.

Coinbase is assisting Novi through Coinbase Custody, which keeps funds secure with its software that manages cryptocurrency transactions.

In other words, Novi users can buy Paxos dollar (USDP) stablecoin through Novi, and Novi will deposit the funds with Coinbase.

According to its market capitalisation, Paxos dollar (USDP) is a stablecoin whose value is pegged to the U.S. dollar and currently ranks position 100.

As per the announcement, Facebook stated that it selected USDP to conduct their test for their systems with the stablecoin, which has been operating successfully for more than three years. The social media giant also mentioned that it chose USDP because stablecoin has important consumer protection and regulatory attributes.

David Marcus, the head of Novi, talked about the development and said that they chose USDP because its services are fully backed by U.S. dollars and are held 100% in cash equivalents and cash. “This means that people can easily withdraw their money in their local currency when they choose,” he explained.

Facebook stated that it eventually plans to migrate Novi to a cryptocurrency it backs called Diem once it obtains regulatory approval. Facebook mentioned that the goal of Novi has always been enabling interoperability with other digital wallets. Marcus said:

“The goal of Novi has been and always will be to be interoperable. Imagine if you couldn’t send an email from a Gmail address to a Yahoo address,”

Diem Facing Regulatory Concerns

Since its inception, the Facebook-affiliated Diem cryptocurrency has changed nearly everything about itself – timeline, partners, structure, and name. It even changed its headquarters from Switzerland to the U.S., one of the most important moves.

Due to its relationship with the data-hungry Facebook, Diem (formerly Libra) has encountered pressures from regulators across the globe. Some of the major concerns by regulators involved fears that Diem could threaten monetary stability and potentially enable money laundering. Facebook’s involvement also implied that regulators are concerned over how it could protect users’ privacy.

To move ahead, the project relocated its headquarters to the U.S. and chose Silvergate bank, a crypto-friendly bank based in California, to issue the stablecoin.

Despite losing some members such as PayPal, eBay, Vodafone and others, Diem picked up other experienced partners that could assist in smoothening its path to other countries.

Meanwhile, a group of five Senate Democrats yesterday wrote an official letter to Facebook CEO Mark Zuckerberg urging him to discontinue the Novi wallet pilot. Led by Senator Elizabeth Warren, the policymakers argued that Facebook had not provided a satisfactory explanation of how Diem would prevent illicit financial flows and other criminal activity.

Binance to Convert Users’ USDC Into Its Own Stablecoin

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Binance cryptocurrency exchange announced on Monday that it has introduced “BUSD Auto-Conversion”.

The latest program will, therefore, allow customers to convert any existing user balances and new deposits of four stablecoins such as USD Coin (USDC), Pax Dollar (USDP) and True USD (TUSD), into its own native stablecoin BUSD, effectively delisting trading of the three rival stablecoins.

The company disclosed the reason behind the move: “In order to enhance liquidity and capital-efficiency for users, Binance is introducing BUSD Auto-Conversion for users’ existing balances and new deposits of USDC, USDP, and TUSD stablecoins at a 1:1 ratio.”

Binance further said it will remove and stop any trading on spot pairs, including USDC, USDP and TUSD.

The conversion is scheduled to start on September 29. “With effect from 2022-09-29 03:00 (UTC), users will trade with a consolidated BUSD balance on the Binance Platform that reflects their balances of these four stablecoins (BUSD, USDC, USDP and TUSD) post-conversion”.

USDC is the second largest stablecoin by market cap at $51 billion, according to CoinMarketCap. Binance’s BUSD stablecoin comes third, with a market cap of $19 billion, while USDP and TUSD are far smaller.

The move will effectively remove direct custody of USDC, USDP and TUSD for Binance’s 120 million users worldwide.

However, the firm said the move will not affect users’ choice of withdrawal. “Users will continue to withdraw funds in USDC, USDP and TUSD at a 1:1 ratio to their BUSD denominated account balance”, the company explained.

The exchange said customers will be able to see the converted balance on their accounts within 24 hours. And further stated that the minimum amount for manual conversion is 1 USDC, USDP, or TUSD while accounts with lower balances auto-convert to BUSD.

Binance also said it may expand or amend the list of stablecoins eligible for auto-conversion.

The exchange further said it will remove the support for USDC, USDP, and TUSD products, including spot trading, futures, and margin lending.

USDC products affected include crypto loans, saving accounts, and DeFi staking subscriptions, which will be closed and liquidated on September 23rd.

The news is met with some scepticism, as some users have faulted the decision to convert rival stablecoins into Binance stablecoin.

“Crypto monopoly 101, Binance will remove $USDC as a tradable asset by Sep 25 to push their $BUSD.” a Twitter user by the name ‘@BloodgoodBTC’ said.

A Circle spokesperson also commented about the development: “Based on market activity, it would seem much of this transition has already passed, and while optimizing dollar liquidity on the world’s largest exchange may carry benefits, the paradigm does raise potential market conduct questions.”

Tether (USDT), the largest stablecoin that has a market cap of $68 billion, will remain accessible on the Binance platform.

Stablecoins, a newer breed of cryptocurrency, are gaining popularity for their commitment to minimising the price volatility that has limited the use of Bitcoin and other digital assets as a medium of exchange.

Since Tether (USDT) was launched in 2014 as the first stablecoin, the list has grown to include the likes of USD Coin (USDC), Dai (DAI), True USD (USDT), Binance USD (BUSD), Paxos Standard, Digix Gold, Havven’s Nomin, among others.

Bank of America Says Binance to Benefit from Increased Supply of Its Own Stablecoin

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Bank of America (BAC) has talked about the recent decision by the Binance exchange to convert all existing user balances and future deposits of three stablecoins USD coin (USDC), trueUSD (TUSD) and pax dollar (USDP) into its native Binance USD (BUSD).

On Friday, the bank released its research report pointing out that while Binance’s move may generate limited additional revenue in the short term for the exchange, it could have wider implications in the long term.

The bank said the automatic conversion may increase the supply of BUSD by as much as $908 million, as 1% ($10 million) of USDP’s supply and 2% ($898 million) of USDC’s supply are held on Binance.

The Bank of America acknowledged that the fact that BUSD holds a market capitalization of 19 billion indicates that the stablecoin is not being used regularly throughout the broader crypto ecosystem and therefore, lacks utility.

However, the bank sees the potential for a larger increase in BUSD supply over the long-term as customers become more familiar with the stablecoin and its applications across the ecosystem adding more support for it in an attempt to attract more users.

According to the Bank of America, Binance will benefit from this increasing supply because it is able to invest the additional reserves that will back the stablecoin in cash equivalents like U.S. Treasury and overnight loans secured by Treasury to earn interest income.

On the other hand, the bank said although the implications for USDC are limited, there is the potential for the stablecoin to increase its market share relative to Tether (USDT). This is because Binance users may be more likely to convert BUSD into USDC than into USDT when withdrawing funds.

Tether (USDT), the largest stablecoin by market cap, was excluded from the automatic conversion. USDC stablecoin has a market capitalization of just under US$52 billion, followed by BUSD at US$19.5 billion.

The market leader Tether (USDT), has a market capitalization of US$67 billion, and will still be tradeable on Binance.

Questioning Binance’s Move

Bank of America joins other stakeholders who have recently raised questions about Binance’s decision to stop supporting USDC and other stablecoins on its platform.

On Monday, Binance announced that it would convert customers’ holdings in three rival stablecoins — USDC, Pax Dollar (USDP) and True USD (TUSD) — into BUSD on September 29. As a result, it would remove spot, future, and margin trading with USDC, USDP, and TUSD pairs.

Binance said the decision was designed to “enhance liquidity and capital-efficiency for users.” However, the news was met with skepticism, as some users faulted the decision to convert rival stablecoins into Binance stablecoin.

Concerns have been raised about a possible monopolistic behavior of Binance’s move to sideline other stablecoins in order to promote its own.

But, Circle CEO, Jeremy Allaire, recently backed Binance’s decision, saying that the new change will help USDC become the market’s preferred stablecoin rail for moving funds between centralized exchanges (CEXs) and decentralized Exchanges (DEXs).

Binance-Backed WazirX Exchange to Delist USDC, USDP & TUSD

Indian cryptocurrency trading platform WazirX has announced it will be delisting USD Coin (USDC), USDP, and TUSD in a move that is similar to its so-called parent company, Binance Exchange.

In a Monday update, WazirX said the deposit support for these tokens has already been halted, and that withdrawal support will run from now until 5 p.m, IST on September 23rd.

The exchange said the tokens will automatically be converted to Binance USD (BUSD) and the conversion will run until October 5.

The conversion from USDC, USDP, and TUSD will be on the ratio of 1:1. While the delisting process is billed to continue until September 26, the trading platform said users will still be able to view “their USDC, USDP, and TUSD balances under the BUSD-denominated account balance when the conversion is complete.”

The delisting of the three tokens comes off as regulatory scrutiny mounts, as well as Binance exchange made a similar move in the past month.

The move has been welcomed with dissenting views by industry stakeholders, however, veterans like Jeremy Allaire, the co-founder and Chief Executive Officier of USDC issuer, Circle have backed the exchange, noting among many things that the delisting of USDC may push the stablecoin to become the standard stablecoin rail between centralized exchanges (CEXs) and decentralized exchanges (DEXs).

With WazirX making a similar move from Binance, it is not clear at this time whether the two trading platforms have set aside their differences especially as it concerns the ownership of the Indian offshoot.

During the probe of WazirX over fraud-related cases by the Indian Enforcement Directorate (ED), dust was raised as to the ownership status of the exchange. While there is an understanding that Binance had earlier acquired WazirX based on an announcement dating back to 2019, the trading platform’s CEO Changpeng Zhao in a spat with WazirX’s Nischal Shetty said the acquisition did not pull through.

While the ownership status is yet to be cleared, that WazirX is delisting the top stablecoins on its platform in favor of BUSD shows there is a connection between both entities.

MakerDAO Keeps USDC as Primary Collateral for Dai

Since there is a possibility of hazards being linked with USDC, the MakerDAO Risk Core Unit recently proposed the notion of diversifying the collateral for Dai. This suggestion was made as a response to the proposal. Nonetheless, MKR holders voted decisively in support of maintaining USDC as the major collateral for Dai. With a vote of 79.02% in favor of expanding the USDC-to-DAI minting capacity and decreasing the cost to 0%, MKR holders voted in favor of retaining USDC as the primary collateral for Dai.

Due to USDC’s “possibly more dangerous exposure to uninsured bank deposits” and “a weaker legal framework” in comparison to its rivals, the suggestion advised diversifying collateral into GUSD and USDP. Nevertheless, according to the Risk Core Unit, the risks that are connected with utilizing USDC as collateral have dramatically diminished from the previous week. This information was provided by the Risk Core Unit.

When a string of failed banks forced the USDC to briefly lose its $1 peg, the decision was made to maintain USDC as the principal collateral for Dai transactions. In response to this, MakerDAO has introduced efforts to prevent Dai from being undercollateralized. These actions include increasing the charge to mint Dai using USDC as collateral from 0% to 1%, as well as lowering the daily minting cap for this procedure.

A vote of confidence in the stability of the USDC stablecoin and its capacity to retain its $1 peg can be inferred from the fact that USDC will continue to serve as the principal collateral for the Dai cryptocurrency. Yet, this does bring up concerns about the possible hazards that are connected with placing a significant amount of reliance on a single collateral item.

It is quite possible that new discussions and disputes around collateral diversification will continue to emerge inside decentralized autonomous organizations such as MakerDAO as the cryptocurrency market continues to expand and stablecoins become more widely used.

Binance Futures to Introduce FDUSD Margin, Phase Out USDP

Binance, the world’s leading cryptocurrency exchange by trading volume and users, has announced significant updates to its futures trading platform. Starting from March 8, 2024, at 09:00 (UTC), Binance Futures will begin supporting FDUSD as a margin asset in Multi-Assets Mode, while simultaneously phasing out support for USDP.

This strategic move aims to streamline the futures platform’s operations and provide users with more robust options for margin trading. Users holding USDP will need to be attentive as Binance has set the transfer-in limits for USDP to zero in preparation for the transition. After March 14, 2024, 06:00 (UTC), any remaining USDP balances in users’ USDⓈ-M Futures wallets will be automatically converted to USDT at a 1:1 ratio within approximately 24 hours.

Binance has advised users to avoid adding new futures positions with USDP during the conversion period to prevent potential losses. They have clarified that they will not be responsible for any losses incurred during this period due to the conversion process.

The introduction of FDUSD as a margin asset will follow specific guidelines. The maximum transfer-in limits for FDUSD will be determined by users’ VIP levels, and Binance has set the haircut rates for FDUSD in an Auto-Exchange at 1%. The platform will calculate FDUSD margin balances in real-time according to the FDUSD price index.

This development reflects Binance’s commitment to providing a flexible and efficient trading environment. By enabling FDUSD margin trading, Binance Futures is enhancing the platform’s utility and ensuring that it remains aligned with the evolving needs and preferences of the trading community.

However, Binance has also cautioned that it reserves the right to amend maximum transfer-in limits and haircut rates depending on market conditions, underscoring the dynamic nature of the cryptocurrency market.

As with all trading decisions, Binance urges users to exercise responsible trading practices. The volatility of digital assets can result in significant profit or loss, and it’s crucial for users to make informed decisions based on their risk tolerance and investment objectives.

The Binance team has reiterated its dedication to supporting its users through this transition and has encouraged users to consult the Multi-Assets Mode FAQ and How Does Auto-Exchange Work in Multi-Assets Mode for additional information.