Since becoming embroiled in a regulatory dispute, BUSD’s market capitalization has entered a sharp downward spiral. Since hitting an all-time high of $23.04 billion in November 2022, the once-major stablecoin’s market capitalization has declined by more than 60% to $9.17 billion at the time of writing.
The Paxos situation is indicative of the broader landscape of crypto exchanges under attack from the United States Securities and Exchange Commission (SEC). Uncertainty hangs over the stablecoin industry. Despite the fact that Binance does not issue BUSD, the stablecoin remains essential to its ecosystem.
Implications of the crackdown
Adam Cochran believes that the SEC’s suggestion that Binance is an unregistered exchange on the grounds that BUSD is an unregistered security is “brutal 4D chess.” the more speculated that Binance has two options: get established or be open to discovery by a US agency. The first scenario will set a “soft precedent” for the SEC to intimidate other crypto exchanges in the country.
“If they did come to an agreement, it would surely block the Voyager deal and result in a penalty and probable industry delisting in the US for executives (would you also remove their market making entity?) from exchanges.”
On the other hand, the latter scenario could prove more damaging for Binance. while he was talking to crypto potatoDavid Kemmerer, co-founder and CEO of CoinLedger, stated:
“If BUSD is determined to be a security by the regulator, Binance will be subject to additional supervision and regulation over the stablecoin. The crypto exchange would have to meet strict SEC rules to issue BUSD on its platform.”
Paxos categorically in disagreement with SEC staff, saying that BUSD is not a security under the federal securities laws. A similar sentiment is echoed by many industry insiders that the BUSD issued by the company is not an “investment contract” under the Howey test due to the lack of expectations of any kind of profit. But it is also important to note that the Securities Act of 1933 includes more than 30 characteristics that define security.
While Paxos complied with the NYDFS order to stop minting new BUSD, Binance chief CZ saying the exchange will continue to support BUSD. With the stablecoin being a core component of Binance’s business, its crackdown is expected to hurt Binance’s overall bottom line, Kemmerer added.
If the SEC succeeds in killing BUSD, the implications are many. For one, such a move could “encourage regulators to target other stablecoins in the future.” According to Mohammad Taher Khayami, COO of Dubai-based iTeller, there could be a significant contraction in the stablecoin market as users become increasingly wary of using these tokens for fear they could be shut down at any time. . he added,
“This, in turn, could lead to decreased liquidity and trading volumes in the cryptocurrency market, which would be bad news for Binance and other exchanges that rely on stablecoins to facilitate transactions.”
Will the blow be fatal for Binance?
Richard Mico, US CEO and Banxa’s chief legal officer, said the SEC’s action against BUSD could be a roundabout move to penalize “offshore” crypto companies like Binance rather than the stablecoin project itself.
“The SEC continues to crack down on a number of different elements of the crypto industry, and many are concerned that the regulator is regulating through enforcement rather than a clear regulatory framework.”
While the setback for BUSD will have a ripple effect on Binance, many still believe that it will bounce back from the latest setback, as the crypto exchange has a strong track record of adapting to changes in the market. The last hit may not prove fatal.
Binance Free $100 (Exclusive) – Use this link to sign up to receive $100 free and 10% off your first month’s fees for Binance Futures (terms).
PrimeXBT Special Offer – Use this link to sign up and enter the code POTATO50 to receive up to $7,000 on your deposits.
