Binance CEO Changpeng Zhao (CZ) has warned of “profound consequences” for the crypto industry if the Binance USD (BUSD) stablecoin is recognized as a security. His warning follows an alleged US Securities and Exchange Commission (SEC) lawsuit against Paxos, the issuer of Binance USD.
Binance CEO on SEC Actions Against Paxos and BUSD
Following news that the US Securities and Exchange Commission (SEC) intends to take action against Paxos Trust Company over Binance USD (BUSD) stablecoin, Binance CEO Changpeng Zhao (CZ) took to Twitter on Monday to explain situation.
Paxos, which is regulated by the New York City Department of Financial Services (NYDFS), also announced on Monday that it “will end the relationship with Binance for BUSD branded stablecoin.” Paxos also stated that it will “stop issuing new BUSD tokens” on February 21st.
“Paxos informed us that the New York City Department of Financial Services (NYDFS) has ordered them to stop issuing new BUSD,” Binance CEO tweeted, emphasizing:
BUSD, although called Binance USD, is not issued or redeemed by Binance… BUSD is a stablecoin wholly owned and operated by Paxos.
CZ noted that when Paxos stops issuing new BUSD tokens, the market cap of the stablecoin “will only decrease over time.” At the time of writing, BUSD has a market capitalization of almost $16 billion, making it the seventh largest cryptocurrency in the world and the third largest stablecoin.
According to Zhao, “Paxos will continue to serve the product and manage the redemption.” He added that Paxos assured Binance that the funds are “safe and fully covered by reserves in their banks, and their reserves have already been audited multiple times by various audit firms.”
CZ on alleged SEC lawsuit against Paxos
The Binance CEO also commented on the alleged SEC lawsuit against Paxos. Admitting that 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.
Deutscher tweeted his opinion on Monday morning on the SEC’s actions against Paxos over Binance USD. He wrote:
The SEC has labeled BUSD as an “unregistered security” and is suing its issuer, Paxos. But how can a stablecoin be considered a security if it clearly doesn’t meet the Howey test criteria. No one has ever had a “profit expectation” when buying BUSD.
In a subsequent tweet, Deutscher acknowledged, “You don’t technically need to pass the Howey test to be considered a security.” However, he stressed, “The SEC basically has free rein to designate an investment asset as a security if it so desires. But it certainly sets a terrible precedent.”
Commenting on whether BUSD is a security, Binance CEO warned:
IF the courts recognize BUSD as a security, this will have a profound effect on how the crypto industry will develop (or not develop) in jurisdictions where it is treated as such.
“Binance will continue to support BUSD for the foreseeable future,” added CZ, noting:
We foresee that over time, users will switch to other stablecoins. And we will make appropriate adjustments to the product – for example, moving away from using BUSD as the main pair for trading, etc.
“Given the ongoing regulatory uncertainty in some markets, we will be considering other projects in these jurisdictions to ensure that our users are protected from any undue harm,” the Binance CEO concluded.
Last week, the SEC took action against Kraken due to the cryptocurrency exchange’s staking program. The exchange has agreed to phase out the service for US customers and pay $30 million in repayments, pre-judgment interest and civil penalties. Kraken CEO Jesse Powell subsequently called on Congress to pass legislation to protect the US cryptocurrency market and US consumers “who will now go offshore to receive services no longer available in the US.”
What do you think of the SEC statement that the BUSD stablecoin is a non-registered security? Let us know in the comments below.
Denial of responsibilityA: This article is for informational purposes only. It is not a direct offer or solicitation to buy or sell, nor is it a recommendation or endorsement of any products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is directly or indirectly liable for any damage or loss caused or alleged to be caused by the use of or reliance on any content, goods or services mentioned in this article.
Credit : news.bitcoin.com
