Attack of American regulators on BUSD and what consequences will face Binance from impossibility to issue its own stablecoin. Review by Crypto-Upvotes experts
The U.S. Securities and Exchange Commission (SEC) has informed Paxos Trust that it plans to sue it for violating investor protection laws. According to the regulator, Binance USD (BUSD), the third most capitalized stablecoin, is the third-largest. This digital asset, which Paxos issues, is an unregistered security. It is not yet known whether the SEC notice specifically relates to the issuance of BUSD, its listing on exchanges, or both.
The New York State Department of Financial Services (NYDFS) has since ordered Paxos to cease issuing new BUSD tokens altogether. In listing the consequences of stopping the issuance of BUSD, Changpeng Zhao, head of the Binance exchange, admitted. That capitalization of this asset will continue to decline and investors will start to switch to other stablecoins.
Risks to other stablecoins are high
News about banning issue of stablecoin Binance USD (BUSD) had a negative impact on the market. But not as much as from the collapsed FTX exchange. The SEC is investigating the Binance exchange. So Paxos is also in target of the regulator and the New York State Department of Financial Services (NYDFS).
The regulator considers BUSD to be an unregistered security. But with that logic, other stablecoins, USDT and USDC, would also be at risk. Most likely, someone wants to get control of Binance. And creating problems not only for the leading exchange, but also for the whole industry. The risks to other Stablecoins are high.
Binance CEO Changpeng Zhao said he will continue to support BUSD for the foreseeable future. The company predicts that customers will switch to other stablecoins. Therefore, the platform will make changes accordingly.
U.S. regulators declare war on stabelcoins
There are no frontiers for U.S. regulators. All it takes is one American citizen using some platform or protocol. For US regulators to consider these protocols as belonging to their jurisdiction. Attack on stablecoin issuers was expected, the SEC has been saying for years that these companies are not transparent enough. And they don’t comply with U.S. banking laws, don’t have the necessary reserves and so on. If SEC attacked a BUSD issuer, it would be wise to get ready for attacks on other stablecoins, especially USDT and USDC. Given USDT’s majority share of stablecoin market. An attack on them is fraught with a serious crisis in cryptocurrency market and subsequent collapse of all coins without exception.
Our experts note that U.S. regulators have openly declared war on at least Binance itself. In a broader sense, this is a continuation of the fight against stablecoins as an element of opposition to the classical financial system on behalf of the Web 3.0 sphere.
This is a global and extremely important event. It should be taken carefully, and you should read the contents of the documents published by the NYDFS regulator about the ban on continuing to issue BUSD. In fact, it means banning BUSD, but it may be followed by a series of lawsuits.
Our experts are sure that Binance was ready for that. And its management will find a legal and reasonable way out of this situation. Further wide usage of BUSD is out of the question. Perhaps, there will be some alternative or solution. The other major exchanges that issue stablecoins should be prepared for an attack and take some action. In fact, war has been declared on all of them.