Kevin Helms
As an Austrian economics student, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the interface between economics and cryptography.
Binance CEO Changpeng Zhao (CZ) has warned of a “profound impact” on the crypto industry if stablecoin Binance USD (BUSD) is classified as a security. His warning followed an alleged lawsuit by the US Securities and Exchange Commission (SEC) against Paxos, the issuer of Binance USD.
Binance CEO on SEC action against Paxos and BUSD
Following the news that the US Securities and Exchange Commission (SEC) intends to take action against Paxos Trust Company over stablecoin Binance USD (BUSD), Binance CEO Changpeng Zhao (CZ) took to Twitter on Monday to explain the situation .
Paxos, which is regulated by the New York Department of Financial Services (NYDFS), also announced on Monday that “it will be ending its relationship with Binance for branded stablecoin BUSD.” Paxos also said that it will “stop issuing new BUSD tokens” on February 21.
“We have been informed by Paxos that they have been ordered by the New York Department of Financial Services (NYDFS) to stop minting new BUSD,” the Binance CEO tweeted, noting:
BUSD, even though referred to as Binance USD, is not issued or redeemed by Binance… BUSD is a stablecoin wholly owned and managed by Paxos.
CZ noted that if Paxos stops minting new BUSD tokens, the stablecoin's market cap “will only decrease over time.” At the time of writing, BUSD has a market cap of nearly $16 billion, making it the 7th largest cryptocurrency in the world and the 3rd largest stablecoin.
According to Zhao, “Paxos will continue to maintain the product and manage redemptions.” He added that Paxos has assured Binance that the funds are “safe and fully backed by reserves in their banks, with their reserves already audited many times by various auditing firms.” became”.
CZ on alleged SEC lawsuit against Paxos
The Binance CEO also commented on the alleged SEC lawsuit against Paxos. While CZ admitted that he was “not an expert on US law” and had no additional information about the case other than public news articles, he said he personally agreed with cryptanalyst Miles Deutscher's assessment.
German tweeted his opinion Monday morning on the SEC action against Paxos over Binance USD. He wrote:
The SEC has classified BUSD as an “unregistered security” and is suing its issuer, Paxos. But how on earth is a stablecoin considered collateral if it clearly fails Howey's testing criteria? No one has ever had “earnings expectations” when buying BUSD.
In a follow-up tweet, Deutscher conceded, “Technically, it doesn't have to pass the Howey test to be considered a security.” this wishes. But it certainly sets a frightening precedent.”
Commenting on whether BUSD is a security, Binance's CEO warned:
“IF” BUSD is classified as a security by the courts, it will have profound implications for how the crypto industry will (or will not) develop in the jurisdictions where it is classified as such.
“Binance will continue to support BUSD for the foreseeable future,” CZ added, noting:
We foresee users migrating to other stablecoins over time. And we will make appropriate product adjustments – e.g. B. away from using BUSD as the main pair for trading etc.
“Given the ongoing regulatory uncertainty in certain markets, we will review other projects in those jurisdictions to ensure our users are protected from undue harm,” the Binance executive concluded.
Last week, the SEC cracked down on Kraken over the crypto exchange's staking program. The exchange agreed to stop serving US customers and pay $30 million in disgorgement, prejudice interest and civil penalties. Kraken CEO Jesse Powell then urged Congress to pass legislation to protect the US crypto market and US consumers “who will now go abroad to receive services that are no longer available in the US.”
What do you think of the SEC's statement that stablecoin BUSD is an unregistered security? Let us know in the comment section below.
photo credit: Shutterstock, Pixabay, WikiCommons
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