Binance, the world’s largest cryptocurrency exchange by trading volume, has turned to altcoins following regulatory action by the US Securities and Exchange Commission (SEC) against its native stablecoin, Binance USD ( BUSD). The SEC sent a notice from Wells to Binance, alleging that BUSD violates US securities law. The New York Department of Financial Services (NYDFS) has also asked BUSD issuer Paxos Trust to stop minting new BUSD, forcing Binance to look for alternative ways to meet its stablecoin needs.

According to on-chain data, Binance has been looking to onboard TrueUSD (TUSD) and support some decentralized stablecoins. The crypto exchange already minted 180 million TUSD from February 16-24, indicating that it is turning to TUSD to mitigate its stablecoin needs. TrustToken, the operator behind TUSD, has been a Binance partner since June 2019. The partnership allowed Binance to buy TUSD without fees and exchange it for fiat currency. In September 2022, Binance automatically liquidated TUSD to BUSD to increase its market share. Now, with the BUSD ban, Binance is minting more and more new TUSDs.

Binance CEO Changpeng Zhao has said that the exchange will look into other options to diversify its stablecoin away from BUSD after the regulatory actions. Just a couple of weeks later, Binance announced support for the Liquity (LQTY) decentralized lending protocol and launched TrueFi (TRU) perpetual contracts. TRU is the native token of the TrueFi decentralized finance protocol for unsecured lending.

Decentralized stablecoins such as TerraUSD (UST) became popular in the crypto ecosystem, and market insiders believed that they would be the next big thing. However, the collapse of the Terra ecosystem in May 2022 changed views on the nascent stablecoin concept. The Office of the Comptroller of the Currency used the depegging and collapse of algorithmic stablecoin UST as an example of stablecoin “run risk,” and asset-backed stablecoins also saw minor depegging events as a result.

Binance’s move towards alt stablecoins and decentralized stablecoins shows the growing importance of these stablecoins in the crypto ecosystem. As regulatory pressure on stablecoins continues to mount, more and more exchanges and issuers are likely to turn to alternative stablecoins to meet their needs. Whether decentralized stablecoins will become the next big thing in the crypto ecosystem remains to be seen, but they certainly offer an interesting alternative to traditional stablecoins.