Binance to convert users' USD Coin into its own stablecoin

© Reuters. FILE PHOTO: A representation of cryptocurrency is seen in front of Binance logo in this illustration taken, March 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Shivani Tanna and Elizabeth Howcroft

(Reuters) -Binance, the world's largest crypto exchange, said on Monday it will automatically convert user balances and new deposits of the stablecoins USD Coin, Pax Dollar and True USD into its own stablecoin, Binance USD.

The move is intended to enhance liquidity and capital efficiency for users, Binance said in a statement https://www.binance.com/en/support/announcement/e62f703604a94538a1f1bc803b2d579f.

Stablecoins are a type of cryptocurrency designed to maintain a constant value, for example through a 1:1 U.S. dollar peg. They play a crucial role in facilitating crypto trading, and allow traders to store idle crypto cash without converting it back into fiat currency.

Binance said it will stop trading on spot pairs which include USD Coin, Pax Dollar and True USD, although users will still be able to withdraw funds in the form of these stablecoins.

The conversion of users' holdings will take place on Sept. 29, Binance said.

USD Coin (USDC) is issued by U.S. firm Circle and is the world's second-largest stablecoin, with a market capitalisation of $51.8 billion, according to crypto data provider CoinGecko. Binance's stablecoin (BUSD) is valued at about $19.4 billion, according to CoinGecko.

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

Jeremy Allaire, the CEO of Circle, said in a tweet https://twitter.com/jerallaire/status/1566921483003334657 that "converged dollar books on Binance () is a good thing. USDC utility just increased."

In another tweet https://twitter.com/jerallaire/status/1566922064119971840, Allaire said he predicts the move will lead to USD Coin and Binance USD gaining market share from the world's largest stablecoin, Tether.