BUSD Issuance Stops, CZ Responds, BUSD Will Be Redeemable, Is USDC Next?
U.S. regulatory crackdown on crypto companies gains momentum.
Paxos has disclosed that it will end its relationship with Binance for the Binance USD stablecoin and will end the issuance of new tokens on Feb. 21.
Paxos disclosed this in a press release today, saying it acts per directives from the New York Department of Financial Services (NYDFS), a regulatory body overseeing the blockchain infrastructure firm. However, it assures BUSD holders that it will continue to manage reserves for existing tokens, asserting that the tokens are fully backed. Additionally, it will continue to redeem BUSD for USD and its alternative, Pax Dollar (USDP), until at least February 2024.
The latest move follows reports of an imminent United States Securities and Exchange Commission lawsuit against the BUSD issuer. Today, the speculation is that the SEC now views the stablecoin as an unregistered security, leaving the entire crypto community baffled.
Notably, it is the latest in a growing crackdown on the nascent market in the U.S. FOX Business reporter Eleanor Terrett, who has said that more enforcement actions are in the works, has reiterated this view, tapping Juno Banking as likely to come under the regulatory axe next.
Another step in the unilateral effort between the @SECGov, @NYDFS and @USOCC to blitz crypto. More Wells notices going out in the coming 2-3 weeks, I’m told.
Keep an eye on @JunoFinanceHQ. https://t.co/u4Q3pHN2lH
— Eleanor Terrett (@EleanorTerrett) February 13, 2023
It is worth noting that despite its name, BUSD is owned and issued by Paxo. However, due to the Binance partnership, the stablecoin is the preferred choice on the leading crypto exchange, accounting for 90% of all the stablecoins on the crypto exchange, per Nansen data.
Paxos is reportedly facing an SEC lawsuit over Binance USD $BUSD as “an unregistered security”
With a market cap of $16 billion, BUSD is the 3rd largest stablecoin
About 90% of BUSD is held on Binance pic.twitter.com/EPE1VcscPr
— Nansen 🧭 (@nansen_ai) February 13, 2023
CZ Responds
Responding to the latest development, Binance Chief Executive Officer Changpeng Zhao, AKA CZ, reiterated the assurances given by Paxos and asserted that the exchange would continue to support BUSD. At the same time, the Binance chief says the crypto exchange will keep exploring other options as users move away from BUSD, and its market cap continues to reduce.
#BUSD. A thread. 1/8
In summary, BUSD is issued and redeemed by Paxos. And funds are #SAFU!
— CZ 🔶 Binance (@cz_binance) February 13, 2023
Speaking on the alleged SEC case against Paxos, CZ shared the view of the majority of the crypto community, disclosing that if the courts rule in favor of the regulator, it will have a significant influence over how the industry develops in the U.S. while hinting that it could stall its development in the U.S. altogether.
Amidst all of these, some users have speculated that the intended target of this enforcement action is Binance, as Paxos is allowed to continue USDP issuance. Recall that Binance also recently had to halt USD deposits and withdrawals.
Is Circle USDC Next?
Following Paxos’ announcement, users have speculated that Circle’s USDC, which it offers in partnership with Coinbase, could be next. This is because both are structurally similar and incorporated in the U.S.
X3 Founder @AP_Abacus, citing unnamed sources, has given credence to this speculation, saying Circle will get sued along with every other stablecoin issuer. The unidentified source cites this as why PayPal abandoned its stablecoin project.
UPDATE: Expect @circle and USDC to be the next SEC stablecoin target to receive a Wells Notice.
**sources: “Circle will get sued, as will every other stablecoin of consequence.”
**source: “Look at @PayPal abandoning their stablecoin project; what else do you need to know?”
— Andrew (@AP_Abacus) February 13, 2023
Stablecoins have bolstered crypto adoption, serving as easy on/off-ramps for investors. However, it appears that regulators are now bent on cutting off this vital bridge to the crypto markets in the U.S.
Following the Paxos announcement, BUSD has slightly de-pegged from the dollar, trading for $0.9995 at press time, as holders swap to other stablecoins. Notably, USDC also experienced a brief de-peg, falling as low as $0.9994 at one point before paring the losses at press time to trade at $0.9999.
Tether (USDT) has been the biggest beneficiary of the BUSD outflows. It has closed in on capturing 50% of the stablecoin market.
