The SEC is set to launch enforcement action against Paxos, the issuer of BUSD, as it deems the stablecoin a security. This news has caused Binance’s BNB token to drop 6.5%, while Bitcoin and Ether remain flat. Paxos has stated that it will vigorously defend itself, and the issue is going to court. This news has caused some concern in the crypto community, as it highlights the increased scrutiny of the SEC on the crypto industry. However, it is important to note that this is not the first time the SEC has taken action against a crypto company, and it is likely that this will not be the last.
Crypto markets are reacting negatively to news of withdrawals from Binance, with traders concerned about the potential for increased regulatory scrutiny from the SEC. According to Ryan Grace, Head of Digital Assets at Tastycrypto, the primary driver of the market downturn is macroeconomic, with the Fed’s policy and Tuesday’s expected CPI data playing a role. Investors are worried that the Fed won’t be able to land the economy in a soft landing, and that higher interest rates could be on the horizon.
Grace believes that it’s possible for Bitcoin to end the year above $25,000, but in the immediate future, it’s still a difficult market. According to Grace, there will be more volatility and chop before the cryptocurrency reaches that level. The biggest gainers in the market are Terra LUNA, with a 1.7% return, and Bitcoin, with a 0.1% return. The biggest losers are Polygon MATIC, Shiba Inu, and Loopring, all with returns of -4.1%, -4.0%, and -3.9%, respectively. Despite the current market conditions, Grace remains optimistic that Bitcoin will reach the $25,000 mark by the end of the year.
The U.S. Securities and Exchange Commission (SEC) is continuing its crackdown on the crypto industry, this time targeting the Binance-branded stablecoin BUSD. BUSD is issued by Paxos and regulated by the New York Department of Financial Services, making it a much more transparent and compliant stablecoin than Tether, which has been fighting to keep the backing of USDT a secret. This regulatory cloud is forming over the US and could have a significant impact on the crypto industry. The SEC’s actions could lead to more stringent regulations and compliance requirements for crypto companies, making it more difficult for them to operate in the US.
The US Securities and Exchange Commission (SEC) has placed a curse on Binance’s BUSD stablecoin, subjecting it to the Howey Test. This test determines whether a transaction is an investment contract and thus a security. The news has caused a negative reaction in the market, with BNB tokens falling 7% and BUSD seeing $52 million in inflows to exchanges. The SEC’s action came without warning, leaving Binance CEO Changpeng “CZ” Zhao to reassure investors that funds are safe. The SEC’s Howey Test is a 1933 Supreme Court case that determines whether a transaction is an investment contract and thus a security. Binance’s BUSD stablecoin is now subject to this test, and investors are concerned about the implications.
Stablecoins, a type of cryptocurrency, may be considered securities under the Reves test, a four-part test established in a 1990 case that examines when a note is a security. This is according to a June 2022 briefing paper prepared by the Congressional Research Service. The paper outlines how some commentators have proposed theories to support the proposition that stablecoin purchasers may be motivated by profits for purposes of the Howey and Reves tests. The issue remains “unsettled” and the lack of clarity sets the stage for a trial. This is an ancient argument in crypto years and the outcome of the trial will have a significant impact on the future of stablecoins.
The U.S. is engaging in “regulation by enforcement” when it comes to stablecoins, while Asia’s financial centers are developing clear-cut frameworks. Hong Kong is developing its own stablecoin regime, which looks to give the green-light to asset-backed stablecoins, while Singapore is in the process of consultation with stablecoin issuers. The proposed route could see them being licensed under the city-state’s digital payment token service providers regime, which is regulated by the Payment Services Act 2019. This is in contrast to the U.S., which is taking a more hands-off approach to regulation. As such, Asia is leading the way in terms of providing a clear regulatory framework for stablecoins.
Ripple’s General Counsel, Stu Alderoty, has expressed his concern about the lack of clarity from the U.S. Securities and Exchange Commission (SEC) on cryptocurrency regulations. He believes that this lack of clarity is pushing innovation offshore to other economic centers like Singapore. Binance, a leading cryptocurrency exchange, has echoed Alderoty’s thoughts, stating that they will be reviewing other projects in jurisdictions with regulatory uncertainty to ensure their users are not harmed. This lack of clarity from the SEC could lead to the U.S. losing its position as a leader in the new financial economy.
