As we enter a new week, the crypto space faces yet another obstacle – this time from the United States Securities and Exchange Commission (SEC). The SEC has mandated that Paxos Trust must stop issuing Binance USD — a US dollar-backed stablecoin. Consequently, coupled with an unavoidable cease order issued to them by New York’s Department of Financial Services (NYDFS), Paxos was obliged to proclaim their termination of affiliation with BUSD effective February 21st. This decision brings us one step closer to realizing what implications may arise for other existing and future stablecoins in the market.
Part of the Crypto Community Sees This as a Precautionary Action Against Only Paxos
Crypto-enthusiasts of all stripes had much to say when allegations arose that BUSD was an unregistered security, from calling it “FUD” to accusing the Binance exchange. Miles Deutscher posed the most obvious yet perplexing point: why would anyone expect any profit if they are buying a stablecoin? It is simply not logical! Even with this confusion abounding, many in the crypto community continue to support BUSD as its usage increases.
The ramifications of the SEC’s decision may have serious implications for the stablecoins industry as a whole. Changpeng Zhao, CEO of Binance, suggested that we might drop the US Dollar as our peg currency in exchange for Euro, Yen, or Singapore Dollars instead. But other professionals think this was not meant to be an attack on all stablecoins but rather only targeted at Paxos specifically as a preventative action.
On the Other Hand, the SEC’s Attitude May be Related to the Collapse of Terraform Labs
The Securities and Exchange Commission (SEC) has taken action against Terraform Labs, the issuer of Terra stablecoin, and its founder, Do Kwon, accusing them of a massive crypto asset securities fraud. The SEC claims that Kwon and his company sold an expansive set of unregistered cryptographic assets without adhering to legal regulations. Kwon, a South-Korean national, has eluded authorities after he fled his home in Singapore in September 2022 upon the Seoul court issuing an arrest warrant for him. Interpol then released a Red Notice to law enforcement worldwide and is currently believed to be located somewhere in Serbia.
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