Binance BNB Token Price Plunges, But Bitcoin BTC Price Holds Near $21.8K Amid US Regulatory Uproar

BNB Down on Regulatory Concerns While Bitcoin, Ether Flat

Binance is getting a lot of love from regulators this Valentine’s Day (UTC), sending BNB down 6.5% while bitcoin and ether remain flat.

Regulators in the US are keeping a close eye on crypto these days, and Binance’s BUSD stablecoin is their latest target. The Securities and Exchange Commission (SEC) is set to initiate enforcement action against Paxos, the issuer of BUSD, as it considers the stablecoin a security. Paxos says it will defend itself vigorously, and the case will go to court.

Traders are reacting badly, with withdrawals from Binance increasing according to on-chain data from Nansen.

“If this is a Binance issue, we see additional type of regulatory scrutiny being imposed by the SEC, you have that headline risk, and I think that’s certainly what’s weighing on the crypto markets,” Tastycrypto Head of Digital Assets Ryan Grace told CoinDesk TV.

But Grace added: “I think the macro type of economic background is still the primary driver here. It’s fed politics. In addition to some of the SEC headlines, we have CPI again on Tuesday which is expected to come down a little bit. But you’re starting to see in the markets some concern that not even a soft landing, but that the Fed is not going to land here. The economy is going to be hot, and eventually you’re going to see higher interest rates.”

Grace believes that it is possible for bitcoin to end the year above $25,000, but in the immediate future it remains a difficult market.

“You’re going to see a lot more volatility, a lot more chop before we get there,” he said.

A regulatory cloud is forming over the US

The US Securities and Exchange Commission’s crackdown on crypto has continued for a second week. Just as Asia got to work on Monday, the Wall Street Journal had a bombshell: The SEC was going after Binance-branded stablecoin BUSD.

Going after BUSD may seem like an odd tactic to some observers. While the stablecoin carries Binance’s branding, it is issued by Paxos and regulated by the New York Department of Financial Services. Unlike Tether, which fought in court to keep what underpins USDT a secret, BUSD is the right way to create a stablecoin.

Sources close to the matter say it all came without warning. But that’s not good enough for the SEC.

The regulator has placed a curse on it – the Howey test – a 1933 US Supreme Court case which held that if a transaction is found to be an investment contract, it is considered a security.

To be sure, there is an argument – ​​an ancient one in crypto years – that stablecoins are securities.

“Nevertheless, some commentators have proposed theories to support the proposition that stablecoin buyers may be motivated by profit for the purposes of the Howey and Reves tests,” the CRS paper said. “In short, the arguments appeal to the role that stablecoins play in facilitating cryptocurrency speculation and the fact that some stablecoins have traded above par during the crypto market turmoil.”

The CRS concludes that the issue remains “unsettled”, but warns that the lack of clarity lays the groundwork for legal action.

The problem is that while the US engages in “regulation by enforcement”, Asia’s financial centers are developing clear frameworks.

Hong Kong is developing its own stablecoin regime, which appears to give the green light to asset-backed stablecoins (provided the reserve funds are of “high quality and high liquidity” as they meet outstanding stablecoins in circulation), but gives the red light to algorithmic stablecoins .

Meanwhile, the Monetary Authority of Singapore is in the process of consulting stablecoin issuers. One proposed route could see them licensed under the city-state’s digital payment token service provider regime, which is regulated by the Payment Services Act 2019.

“It hasn’t provided clarity and it’s pushing innovation offshore to other economic centers like Singapore,” he said. “If the United States gets it wrong, it is going to lose its position as a leader in this new financial economy.”

Binance, in a statement to CoinDesk after the story broke, appeared to reinforce Alderoty’s thoughts.

“Given the ongoing regulatory uncertainty in certain markets, we will consider other projects in these jurisdictions to ensure our users are insulated from further undue harm,” a spokesperson said.

Bitcoin (BTC) and ether (ETH) both traded down after stablecoin issuer Paxos announced it will stop minting new Binance USD (BUSD) tokens at the direction of the New York Department of Financial Services (NYDFS), with the news coming just after a report on the threat of legal action from the US Securities and Exchange Commission (SEC).