What is Binance USD and what is it used for?
To figure out the difference between Tether vs Binance USD I need to subject you to some history first. Binance USD (aka BUSD) is a stablecoin that was created in 2019 by Binance in collaboration with Paxos. It is pegged 1:1 to the US Dollar (USD). In layman’s terms, each BUSD in circulation is backed by a real USD that’s held in reserve. This is excellent use for crypto users who are particularly worried about volatility, as the value of BUSD is as stable as that of the American Dollar.
BUSD is used in several ways on the Binance platform. It started out mostly as a medium of exchange to trade different cryptocurrencies without being affected by significant price shifts. Basically, it acts like a temporary holding point in between trading, removing the need to convert entirely back to fiat currency.
Today you can also use BUSD widely across the crypto market, in the same way you’d use Bitcoin, for example. Most decentralized finance (DeFi) platforms accept it for participation in activities like yield farming, lending, and borrowing, all while keeping your risk very low due to its stable value. You can also use it at BUSD crypto casinos. To recap, uses include:
- Medium of exchange: Easily trade between cryptocurrencies without worrying about drastic value changes.
- Value storage: Temporarily hold assets in a stable form while deciding on your next trading move.
- Participation in DeFi: Use BUSD for yield farming, lending, and borrowing without dealing with the risks of more volatile assets.
- Stability: Maintain value similar to traditional currencies while benefiting from blockchain technology.
- Online gambling: Use it on a variety of games, such as slots, roulette, and blackjack, at your favorite crypto casinos.
No matter how you use BUSD, its biggest attraction remains the fact that you can own cryptos without exposing yourself to the high volatility normally associated with digital currencies.
How does Binance USD work?
Binance USD is based on a pretty straightforward idea: how can skittish crypto-lovers enjoy the perks of cryptocurrencies without the downsides of volatility? BUSD is all about having your cake and eating it, with real US dollars keeping its value from fluctuating. For every BUSD token that exists, there’s an equivalent US dollar kept safe by Paxos, which is a regulated financial company. In theory, you can always exchange your BUSD for an equal amount of US dollars.
How safe is Binance USD?
I used the words “in theory” above, because obviously this system depends entirely on our trust. To be blunt - how can we be sure that Paxos is doing what it claims and that there is an actual, physical stash of US dollars backing the crypto?
Well, the company is registered in the US as a financial company, and is subject to regular auditing. The bulk is conducted by the New York Department of Financial Services(NYDFS), which is responsible for the following:
- Auditing of Paxos’ financial reports
- Checking that the number of BUSD tokens in circulation matches the dollars held in reserve
- Ensuring that all operations are in compliance with various other anti money-laundering and anti-fraud laws in the US.
The reserve of US dollars is also separately audited by Withum, an independent and certified auditing firm. All its reports are available online on the Paxos site. So what are the chances that it faces the same type of scandal as TerraUSD (UST) faced in 2022 when it lost its peg to the US dollar? Very slim.
Although a stable coin, UST was not fully-backed by real dollars. Instead, it relied on a more complex mechanism involving another cryptocurrency, which ultimately proved unsustainable during periods of market stress.
Still, the UST crisis does serve as a reminder of the importance of transparency, regulatory backing, and proper reserves when choosing a stablecoin - all of which BUSD fully satisfies.
BUSD is issued on the Ethereum blockchain, but it also works on the Binance Smart Chain, so it’s pretty flexible to buy, trade, and store on a range of crypto wallets, using a variety of networks.
What is the difference between USD and USDT on Binance?
BUSD isn’t the only stablecoin you’ll encounter on Binance. USDT is equally popular, particularly at Tether casinos. When comparing Tether vs Binance USD vs USD, at first glance the differences may appear to be negligible. However, there are significant differences in the way all three are backed and regulated.
- USD is one of the strongest fiat currencies available internationally, regulated at federal level.
- BUSD is fully backed by actual USDs held in reserve and independently audited. When buying it you can be confident that each token is supported by a real USD dollar at the ready.
- USDT refers to the Tether crypto and operates somewhat differently as it’s only theoretically backed by USD.
Confused? The below table makes it easier to follow the distinctions between BUSD and Binance USDT vs USD.
| Feature | BUSD | USDT | USD |
|---|---|---|---|
| Issuer | Binance & Paxos | Tether Limited | Federal Reserve (via banks) |
| Regulation | Regulated by NYDFS | No major regulatory oversight | Regulated by the US government |
| Backing | Fully backed by US dollars | Backed by a mix of assets (not all cash) | Fully backed by Federal Reserve |
| Transparency | Monthly independent audits | Less transparency about reserves | Full transparency and oversight |
| Blockchain Support | Ethereum & Binance Smart Chain | Multiple blockchains (Ethereum, Tron, etc.) | Not on blockchain |
| Use Cases | Tied to Binance ecosystem, DeFi | Broad usage across many platforms | Traditional financial transactions |
| Liquidity | High, but focused on Binance | Very high, globally accepted | Universally accepted |
| Safety | Strong regulatory backing and audits | Mixed backing, less regulatory security | Backed by the US government |
Let’s unpack the above, with particular reference to USDT. The latter is issued by Tether Limited and I’m not gonna lie - the company is no stranger to controversy.
While it is also pegged to the US dollar, Tether does not employ the same level of transparency about its reserves. Journalists from The Verge explained how the Tether site used to state that every Tether is always backed one-to-one, by traditional currency held in their reserves. In February 2019, this was quietly changed to: “Tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets.”
This has led to some scepticism within the crypto community about whether the value of USDT is as consistently secure as claimed. The fact that it isn’t regulated by a major financial authority like the NYDFS certainly hasn’t helped its standing in the Binance USD vs Tether battle. Another difference is the way these three currencies are used across the market.
- USDT is one of the oldest and most widely accepted stablecoins and enjoys broad usage across many different exchanges and platforms, for example when playing Tether slots.
- BUSD, while also widely used, is more closely tied to Binance and is heavily promoted within the Binance ecosystem.
- USD remains a traditional fiat currency that’s accepted universally, outside of the crypto space.
To recap, in terms of safety, BUSD has a stronger reputation that is intrinsically tied to that of the USD itself. USDT’s mixed reserves and past controversies, on the other hand, have made some users cautious. That said, both stablecoins are incredibly popular and widely used, including at crypto gambling sites.
What stablecoin should you use on Binance — USDT or BUSD?
There’s no simple answer to this one, as it depends on what your priorities are—whether it's trading convenience, liquidity, or safety.
For trading liquidity
If you want to have access to the widest range of trading options, USDT is generally a better choice. It has been around longer and is more widely accepted, not just on Binance, but across nearly all exchanges globally.
For safety and transparency
If you prioritize safety and stability, you want a stablecoin that has more regulatory oversight. This makes BUSD the better option. It’s backed by actual US dollars and regulated by the NYDFS.For broad accessibility
USDT’s broad market acceptance means it can be used almost everywhere, including many platforms outside of Binance. If you plan on moving funds between different exchanges, or using a stablecoin for transactions outside of Binance, USDT may be the more flexible option.
For lower fees and Binance integration
When comparing the BUSD vs USDT Binance fee options, BUSD tends to have an edge on the Binance platform, especially if you are trading within the Binance ecosystem. Binance often offers lower fees and even fee discounts for using BUSD, as it's their native stablecoin.
Transaction fees for USDT vary
Specific fees depend on which blockchain you use (such as Ethereum or Tron). On Ethereum, fees can be higher due to network congestion, while on other networks like Tron, USDT transactions can be cheaper.
Overall, if you’re sticking with Binance, BUSD is probably cheapest. But if you’re trading outside of the Binance ecosystem, USDT is more versatile.
Binance Coin vs Binance USD: quick guide
When trading on Binance you will also encounter another option - the Binance Coin, aka BNB.
What is the difference between Binance and Binance USD?
Binance and Binance USD (BUSD) serve entirely different roles within the Binance ecosystem. Binance refers to the global cryptocurrency exchange, which offers a variety of services including trading, staking, and launching new blockchain projects. It's also known for its native cryptocurrency, Binance Coin (BNB), which is used to pay for transaction fees, participate in token sales, and more.
Binance USD (BUSD) is the stablecoin pegged to the value of the US dollar and it’s primarily used to provide a stable asset within the volatile cryptocurrency market. Unlike Binance Coin (BNB), which fluctuates in value based on market conditions, BUSD is designed to maintain a steady 1:1 value with the US dollar, providing a reliable store of value and a means to easily transition between different cryptocurrencies without exiting to traditional fiat.
The below table shows the main differences when comparing BNB Binance Coin vs Binance USD within the ecosystem.
| Feature | Binance | Binance Coin (BNB) | Binance USD (BUSD) |
|---|---|---|---|
| Nature | Cryptocurrency Exchange | Native utility token of Binance | Stablecoin pegged to US dollar |
| Purpose | Provide a platform for crypto transactions | Reduce transaction costs, facilitate ecosystem growth | Ensure value stability within the Binance ecosystem |
Binance USD vs BUSD: is there a difference?
Binance USD and BUSD mean exactly the same thing, a stable coin that’s pegged to the US Dollar with a 1:1 value.