In the high-stakes world of stablecoins, it seems that Circle and Binance are vying for the title of top dog.
It turns out that Circle, the purveyor of the USDC stablecoin, was hot on Binance's tail, flagging issues about its mismanagement of reserves months before New York regulators came down on the exchange, according to a recent Bloomberg report.
Circle raised the alarm bells with the New York State Department of Financial Services about its concerns that Binance did not have enough crypto in reserve to back up its tokens, according to a source cited by the publication.As reported by U.Today, the NYDFS has now instructed Paxos to sever ties with Binance, citing "unresolved issues" related to the BUSD stablecoin. The regulator found that Paxos was unable to operate BUSD "in a safe and sound manner."
Binance, for its part, admitted last month that it had issues with historically undercollateralized reserves for its version of BUSD. The B-Tokens were supposed to be backed one-to-one by locked reserves while being stored separately from user funds. However, it seems that the cryptocurrency giant had mistakenly mixed together reserves with exchange-customer funds.
This rivalry between Binance and Circle has been brewing for some time, with Binance implementing a policy last September that automatically converts any deposits of USDC and some other stablecoins on its exchange into BUSD, ultimately reducing Circle's share of the stablecoin market.