Kevin Helms
A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of economics and cryptography.
Binance CEO Warns Of ‘Profound Impact’ On Crypto Industry If BUSD Is Ruled As A Security – Altcoins Bitcoin News
Binance CEO Changpeng Zhao (CZ) has warned of “profound impacts” on the crypto industry if stablecoin Binance USD (BUSD) is ruled a value. His warning followed an alleged lawsuit by the US Securities and Exchange Commission (SEC) against Paxos, the issuer of Binance USD.
Binance’s CEO on SEC Action Against Paxos and BUSD
Following 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 end its relationship with Binance for the tokenized stablecoin BUSD.” Paxos also said it “will stop issuing new BUSD tokens” on February 21.
“We were informed by Paxos that they have been instructed to stop minting new BUSD by the New York Department of Financial Services (NYDFS),” Binance’s CEO tweeted, stressing:
BUSD, although named Binance USD, is not issued or redeemed by Binance… BUSD is a stablecoin wholly owned and managed by Paxos.
CZ noted that once 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 world’s seventh largest cryptocurrency and the third largest stablecoin.
According to Zhao, “Paxos will continue to operate the product and manage redemptions.” He added that Paxos has assured Binance that funds are safe “and fully backed by reserves in their banks, with their reserves audited many times by various audit firms already.”
CZ on alleged SEC action against Paxos
The Binance CEO also commented on the alleged SEC lawsuit against Paxos. While admitting he is “not an expert on US law” and has no further information on the case other than public news articles, CZ said he personally agrees 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 labeled BUSD an ‘unregistered security’ and is suing the issuer Paxos. But how on earth is a stablecoin considered a value, when it clearly does not meet the Howey Test criteria. No one ever had an “expectation of profit” when they bought BUSD.
In a follow-up tweet, Deutscher acknowledged: “Technically, it doesn’t have to pass the Howey test to be considered a security.” Nevertheless, he stressed: “The SEC basically has free reign to define an investable asset as a security if it wants to. But it undoubtedly sets a scary precedent.”
Commenting on whether BUSD is a security, the Binance CEO warned:
‘IF’ BUSD is ruled a security by the courts, it will have a profound impact on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such.
“Binance will continue to support BUSD for the foreseeable future,” CZ added, noting:
We anticipate that users will migrate to other stablecoins over time. And we will make product adjustments accordingly – for example moving away from using BUSD as the main pair for trading, etc.
“Given the ongoing regulatory uncertainty in certain markets, we will consider other projects in these jurisdictions to ensure our users are insulated from any undue harm,” the Binance CEO concluded.
Last week, the SEC took action against Kraken over the crypto exchange’s betting program. The exchange agreed to discontinue service for US customers and pay $30 million in disgorgement, prejudgment interest and civil penalties. Kraken CEO Jesse Powell then called on Congress to pass a law to protect the US crypto market and US consumers “who will now go offshore to get services that are no longer available in the US”
What do you think about the SEC saying that stablecoin BUSD is an unregistered security? Let us know in the comments section below.
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