The world's largest exchange operator wants customers to transact with its namesake stablecoin over others, Crystal writes.

• Binance on Monday said it will automatically convert customers' dollar-pegged stablecoins including Circle's (USDC), Paxos' paxdollar (USDP) and trueUSD (TUSD) into Binance USD (BUSD), effectively delisting competing coins on the exchange.

Why it matters: The move is a land grab — Binance using its weight to boost BUSD, the third-largest stablecoin in circulation, to the detriment of its larger peers USDC, No. 2, and Tether's USDT, No. 1.

• The plan will not include USDT, but Binance said it "may amend the list of stablecoins eligible for auto-conversion."
• Binance's forced conversion of customer assets consolidates power in the ranks, with BUSD and USDC's combined market capitalizations of $71.3 billion just exceeding USDT's $67.5 billion.

The big picture: In effect, the fiat-backed stablecoin market is a three-horse race, with market share almost evenly split between Tether and now Binance/Circle, per data compiled by The Block.

What's happening: Starting Sept. 29, USDC, USDP and TUSD balances in user accounts will be automatically converted, associated trading pairs such as BTC/USDC, for example, will also cease to trade and any staking on those assets will be discontinued.

• But deposits and withdrawals can still be made in those other stablecoins, which means Binance has made those stablecoins interchangeable with one another.

What they're saying: "This conversion is already an accepted practice in the industry and has proven to be in the interest of users above all," Patrick Hillman, chief communication officer of Binance, says in a statement emailed to Axios.

• He adds: "This move was discussed and agreed upon with Circle/USDC and other third parties before making this decision."
• Of note: Binance's stablecoin is technically issued by Paxos, a New York state regulated firm that has a white-label stablecoin business.

💭 Crystal's thought bubble: Remember Disney Dollars? Disney offered customers a 1:1 equivalent to U.S. dollars underwritten by Scrooge McDuck to spend on merch and food within its theme parks. There isn't anything truly nefarious about Binance wanting its customers to transact in BUSD in its own ecosystem in the same way.

• What's maybe iffy about Binance's move is that it forces customer choice — the equivalent of Disney exchanging customers' Legoland and Harry Potter dollars for Disney Dollars right at the gate.

The other side: "While optimizing dollar liquidity on the world’s largest exchange may carry benefits, the paradigm does raise potential market conduct questions," Rachel Busch, a spokesperson for Circle, said in a statement in response to Axios' queries.

• Circle CEO Jeremy Allaire on Tuesday tweeted: "Given how limited BUSD usage is outside of Binance, this will likely benefit USDC usage as the preferred cross CEX and DEX stablecoin rail."

What others are saying: Evgeny Gaevoy, chief of leading market maker Wintermute, tweeted that the move is a net positive for liquidity because trading wouldn't be split between a number of dollar-backed stablecoins, but also a net negative for Circle and Tether.

• "This is the first shot in the upcoming USDT/USDC/BUSD race to become the leading stablecoin over the next years. Tether and Circle will undoubtedly react," Gaevoy tells Axios.

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Investments in blockchain and crypto companies from venture capital, private equity and mergers and acquisitions this year totaled $14.2 billion through the end of June 30, off the pace of last year's more than $30 billion full-year record, according to KPMG's latest Pulse of Fintech report, Crystal writes.

Be smart: The dip in investments is not as pronounced as the chart shows. Figures for the first half already exceed 2018, 2019 and 2020's haul, and it is already the second-highest year of investments in crypto on record.

The banking industry is not eager to see a U.S. central bank digital currency (CBDC), at least not judging by the conversation at The Clearing House and Bank Policy Institute National Conference yesterday in Manhattan, Brady writes.

Why it matters: CBDCs are one of the giant themes behind the scenes, seen as a sort of counter to the cryptocurrency industry and a possible driver for other social goods, such as financial inclusion.

• Very little has been decided about how the U.S. would implement a digital dollar, including whether or not it will ever issue one. One thing that seems to be known, however, is that if it does create one, the Fed will not pull an end run on banks.

What they're saying: "One form of a potential CBDC would need to be intermediated. We would not contemplate a direct account kind of approach," Lael Brainard, vice chair at the Federal Reserve said yesterday at the event.

• By intermediated, it would be a program that would run through financial industry partners.
• Another option would be to set up a system where individuals actually had accounts with the Fed.
• Or a CBDC could be tokenized, on a blockchain, and run through crypto wallets.

But Brainard seems to be saying: Options 2 and 3 just aren't on the table.

Yes, but: Speakers at the gathering mostly made the case that there's not much need for a CBDC however it might be structured.

• "I don't think if we had a world where digital currencies were entirely provided by the private sector that the populace would suffer in any way," Randall Quarles, chairman of The Cynosure Group, a former vice chair of the Fed, said.

Additionally, they doubted that banking partners deploying CBDCs would have much incentive to promote using the instrument.

• "In the intermediated model," professor Darrell Duffie of Stanford said on a panel, "I don't think I would advance the CBDC on my payment apps above the credit card apps that are much more profitable."

The intrigue: CBDCs make banks nervous because they could pull a lot of money out of bank deposits.

• Typically, in bad times, people draw funds out of riskier investments and put them in savings accounts, which are insured. Banks argue this is good because they can then deploy some of those deposits in loans.
• With CBDCs, nervous people are likely to prefer the Federal Reserve as their counterparty, given the option. "It's going to materially increase the fragility of the traditional financial system," Quarles said.

One policy goal a CBDC might advance, however, would be preserving the dominance of the dollar, particularly if it became popular for international transfers.

• In fact, smaller countries might be at risk of losing control of their monetary system, Duffie said. "The footprint of the Fed would be a difficult thing to manage," he added.

🏛 SEC Chair Gensler expresses support for the biggest cryptocurrencies going under CFTC oversight. (WSJ)

🌪 Coinbase backs the lawsuit seeking an injunction against the Treasury Department's sanctioning of the smart contract, Tornado Cash. (Fortune)

📱 Some 70,000 Apple enthusiasts tuned into a phony live stream about the iPhone maker's metaverse and crypto plans. (Decrypt)

🇸🇻 BONUS: Profile of the president of El Salvador, including his decision to make bitcoin legal tender in his country. (New Yorker)

It's new iPhone season. Crypto mavens are linking the release to progress for one of the biggest tokens, Binance's BNB, Crystal writes.

• BUSD is stable, but BNB floats against everything based on demand, including hot gadgets. It is trading at roughly $280.

☕️ Catch up quick: Lots of exchanges issue tokens. They are kind of like coffee shop loyalty cards for crypto traders. Holding them comes with lots of benefits. BNB is the biggest.

Benchmarking BNB against what it would have cost to buy a new iPhone at its launch suggests the value has been on a straight climb.

Yes, but: Every new generation of Apple's smartphone isn't necessarily priced above the last. And BNB is off its May 2021 peak of almost $690, according to data compiled by Messari.