Can the crypto giant withstand the increasing pressure from the US authorities?
Binance is increasingly taking heat from regulators on several fronts, with its US operations the most vulnerable to ongoing crackdowns from the Securities and Exchange Commission (SEC).
Perhaps most pressing for the exchange in the US right now are the allegations from the SEC that Binance.US operates an “unregistered securities exchange in the US.”
The demands from the SEC were communicated during a bankruptcy hearing on failed crypto lender Voyager Digital earlier this month, where an SEC official also said the agency believed Voyager’s VGX tokens violated US securities laws.
Binance.US planned to buy Voyager Digital in a $1.3 billion deal. The deal was initially approved by a bankruptcy court judge, but was later halted by US regulators on the grounds that it violated laws on unregistered offers and sales of securities.
BUSD stablecoin in the spotlight
In addition to the issues surrounding the alleged sale of unregistered securities, US regulators have also cracked down on Binance’s offering of the Binance USD (BUSD) stablecoin, which is issued by the regulated US company Paxos Trust Company.
The stablecoin will now no longer be minted after the New York Department of Financial Services, which regulates Paxos, said there were “several unresolved issues related to Paxos’ oversight of its relationship with Binance.”
In addition to that, the SEC has threatened to sue Paxos for the issuance of BUSD in a so-called Wells Notice. In the notice, the SEC called BUSD an unregistered security.
As a consequence of these actions, Binance CEO Changpeng Zhao (CZ) has. so that the market value of BUSD will fall over time. He also admitted that over time, Binance and Binance users will “move away from using BUSD as the main pair for trading.”
Paxos, for its part, has said that it will “terminate its relationship with Binance” and that it will stop issuing new BUSD tokens from February 21.
Coinbase removes BUSD
Meanwhile, US-based crypto exchange Coinbase said as recently as last week that it would no longer support trading BUSD, citing “listing standards” as the reason for the decision.
“We have disabled trading for Binance USD (BUSD). Your BUSD funds will remain available to you and you will continue to have the ability to withdraw your funds,” the exchange said in an announcement at the time.
Despite all the regulatory hurdles, Binance has continued to operate its US-based operations, which it insists are “a very separate entity” from the larger international exchange. And given the company’s proven track record of playing regulatory games in multiple jurisdictions around the world, chances are high that Binance can continue to find a way around regulatory barriers and government officials who want to see it shut down.
