Reserve Protocol has announced that it will officially revise the RSV basket without BUSD. Until now, the basket was backed by USDC and BUSD collectively; however, the revision would lead to the backing of the RSV basket entirely with USDC. Factors considered for this update were liquidity and broadness of integration.
Reserve reviewed its options and found USDC to be more reliable in a sharp contract than BUSD. Other assets will be considered in the future, provided they are dedicated enough to support the diversity of the basket’s backing.
A factor that was prioritized in the decision was that it would enhance the safety of RSV users, who look to it for everyday savings and payments.
There is a chance for USDC to be dropped too, but that would require the asset to come under scrutiny with a lot of issues. This comes on the heels of Paxos and Binance’s announcements to end their partnership and halt the issuance of new BUSD tokens. This is tentatively scheduled to go into effect on February 21, 2023.
According to the announcement by Binance and Paxos, new and/or old users can either redeem their holdings as US dollars or convert them to USDP (Pax Dollars).
Circling back to the revision of the RSV basket, this change does not signal the intent to migrate from RSV to the USD-dominated RToken. The revision of the RSV basket is entirely in consideration of the safety of the users.
As for Paxos and Binance, the announcement was made on February 14, 2023, to highlight that they would no longer mint new tokens. While new tokens will not be issued anymore, the reserves will continue to be managed by the Paxos Trust, where they are backed by the USD in a 1:1 ratio. The work to cease the issuance of new tokens is underway in close collaboration with the New York Department of Financial Services.
It is likely that the end of the partnership between Binance and Paxos is fueled by the SEC sending a notice to Paxos, highlighting that the issuance of BUSD comes under the issuance of securities but without proper registration. Binance and Paxos are yet to respond to this in public.
Community members can only assume that both partners are working to keep users safe.
Paxos has committed to moving forward to maintain a strong regulatory capital for customer protection. Also, it aims to support long-term goals by further strengthening its profits in the books.
Binance, in its case, is less likely to face trouble since it only has to update the basket and continue performing its operations. This is not the same for others, who would have to work more on the matter following the successful revision of the RSV basket.