Binance, Staking, DCG – Is Bitcoin and the crypto market at risk?
- With the subtle regulatory push against Paxos and Binance, the crypto industry is on edge.
- Industry leaders are convinced that this unrest will pass and are advocating for the avoidance of FUD.
While the year 2022 was marked as one of the most dramatic for the nascent digital currency ecosystem, 2023 has unfolded with so much uncertainty. From the aftermath of the bankruptcy by Genesis Global, a subsidiary of Digital Currency Group (DCG) to the current regulatory crackdown on efforts by US regulators, the industry is experiencing more fear, uncertainty and doubt (FUD) than ever.
SEC and Subtle Binance Crashes
The United States Securities and Exchange Commission (SEC) brought a enforcement action against Kraken trading platform last week. The regulator alleged that the exchange’s betting services are an unregistered security offering, a violation of securities laws for which it ordered the firm to pay $30 million in fines.
While the industry is still reeling from this reality, the commission issued a Wells Notice against Paxos for the issuance of Binance USD (BUSD). The regulator as well as the New York Department of Financial Services (NYDFS) are reportedly concerned that the company may not have investigated its relationship with Binance as it should have.
With a total of over 15 billion dollars in market capitalization, Binance offers a pegged token service where part of BUSD is locked on Ethereum and the Binance-linked version of the stablecoin is issued on BNB and other supported chains. These pegged BUSDs are worth $4.8 billion as of today.
Regulators are now concerned that the Binance version may not have been properly supported. Paxos has revealed that it categorically disagrees with the US SEC’s categorization of its BUSD stablecoin as a security. As reported by Crypto-News Flash, the company is not ruling out the possibility of pursuing legal action if it comes to that.
The company issued a statement to that effect saying;
“Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. This SEC Wells Notice applies only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. Paxos has always prioritized the safety of its clients’ assets. BUSD issued by Paxos are always backed 1:1 with US dollar-denominated reserves, fully segregated and held in external bankruptcy accounts. We will engage with SEC staff on this matter and are prepared to take vigorous legal action if necessary , says the Paxis statement.
A number of industry analysts have highlighted that the attack on Paxos is an indirect attack on Binance, but the crackdown seems to affect the firm a little less at this point.
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Avoid FUD
Leaders in the digital currency ecosystem have advocated that users and investors in digital currencies should avoid the R&D that surrounds the industry at this time.
There have always been reasons for panic and periods US SEC filing seems to weigh down asset valuations, the People’s Bank of China (PBoC) also banned Bitcoin services in China back in 2021. With the industry surviving that attack at the time, experts believe the same will happen this time as well.
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