US Stocks and the Exchange Commission is on the road to war — and electronic money in its crosshairs. Last weekend, The The Wall Street Journal report that the agency intends to sue cryptocurrency company Paxos for issuing BUSD, a stablecoin developed in partnership with the world’s largest cryptocurrency exchange, Binance.
The SEC declined to comment, but Paxos, which is headquartered in New York and Singapore, confirmed today that the agency alleges that BUSD should have been registered as a security in the United States, which requires compliance with regulations. complex rules. in one declareThe company said it “strongly disagrees” that BUSD is a security but has complied with an order from the New York Department of Financial Services to prevent the creation of any new BUSD, causing the coin to be squeezed. effectively blocked.
Paxos did not respond to a request for comment. Binance’s chief strategy officer, Patrick Hillmann, declined to comment on how the SEC action would affect the exchange but said the company will “review other projects to ensure users are protected. from unnecessary harm”.
The crypto industry is no stranger to conflicts with regulators, but Paxos’ case is different—and it has caused a degree of panic and confusion. It is worrisome that a ruling against the issuance or use of BUSD will set a precedent that may apply to all stablecoins, knocking down a critical piece of infrastructure in many crypto markets. Economist Frances Coppola, who previously worked for HSBC and other banks, said: “If the supply were to suddenly dry up, the crypto economy would collapse.
Designed to stick to a specific value, typically $1, stablecoins are an important pillar of the crypto economy. Most are backed by a combination of cash and bonds, which help anchor the tokens in circulation to the desired value.
Cryptocurrency analyst Noelle Acheson, formerly of CoinDesk, said that unlike cash, which can be difficult to move, especially across borders, stablecoins are “easy and fast,” helping traders. Seize opportunities as they arise. Ram Ahluwalia, CEO of wealth management firm Lumida, said it has “opened up an online economy”, allowing money to “flow in and stay in the ecosystem”.
SEC defines securities as contracts that are equivalent to “an investment of money, in a common enterprise, with the expectation of a reasonable profit, derived from the efforts of others.” The classification carries with it a wide range of regulatory and disclosure requirements. If stablecoins were collectively identified as securities, then issuers would have to register them with the SEC, giving the agency the opportunity to reject the coins. Any stablecoin already on the market may be subject to enforcement action.
Surprised members of the crypto industry, including Binance CEO Changpeng Zhaois now questioning how stablecoins can meet the SEC’s criteria and especially how it can be said that cryptocurrencies designed to not fluctuate in value are sold with a period of time. reasonable profit expectations.
But taking action against a major stablecoin issuer would come as no surprise, Acheson said, because the SEC has already speak In many cases, it believes that certain stablecoins qualify as securities. Acheson thinks the regulator would argue that stablecoins like BUSD, which are backed by an issuer holding established securities like government and corporate bonds, are open-ended securities. wide and must be adjusted accordingly.
