The Binance USD was created to be fully collateralized with U.S. dollars held in U.S. bank accounts on a 1:1 basis. These accounts are created and administered by Paxos, and are audited on a monthly basis as prescribed by New York state regulations. Any requests to buy or sell BUSD are accompanied by a movement of cash into or out of the reserve account. Based on these requests BUSD tokens are either minted or burned accordingly. As an example, a purchase of $1,000 worth of BUSD will result in 1,000 BUSD tokens being minted and an increase of $1,000 in the reserve accounts. On the other side of this a redemption of 1,000 BUSD will cause the burning of those tokens and a decrease of $1,000 in the reserve as the U.S. dollars are removed and transferred to the person who redeemed the tokens. In the event there is some critical security threat, such as a hack, Paxos has the ability to pause the transfer, creation, or destruction of BUSD tokens. While Paxos controls the creation and destruction of BUSD tokens, there are also ERC-20 smart contracts in existence that work with BUSD tokens. These smart contracts help provide security for the process as it removes the need for third parties and moves the transactions to the trusted capabilities of the blockchain network.