Aave community is initiating a proposal to freeze stablecoins BUSD on Aave V2 Ethereum chain after information Paxos will stop issuing new BUSD.
On February 13, Marc Zeller, integration lead on Aave, posted a proposal called for a freezing of BUSD holdings on Aave v2, citing that he believes the supply of BUSD is expected to drop to near zero over time, and that it would be best to “redirect” to another stablecoin.
“It seems the most logical option for Aave at the moment is to freeze BUSD reserves and urge users to switch to another stablecoin out of the many stablecoins available at Aave.”
Present, Aave V2 Ethereum reserves about 10.93 million USD BUSD, with about 10,500 USD BUSD held in the DAO.
This proposal will go through a standard approval process, after which the Aave community can begin voting on the optimal choice for asset protection for the DAO.
Paxos will stop issuing new stablecoins BUSD from February 21, 2023, but insists stablecoins are still fully backed by assets corresponding to USD. Investors can still convert BUSD into USD or the company’s other stablecoin USDP between now and February 2024.
Following the above developments, Binance CEO Changpeng Zhao responded on Twitter that Binance may stop using BUSD as its main trading pair if the problem persists.
7/ Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.
— CZ Binance (@cz_binance) February 13, 2023
The world’s largest exchange in January 2023 also admitted The management of BUSD used to have many problems in the past. Paxos also revealed that it will terminate its partnership agreement with Binance because of its involvement in the stablecoin.