SEC Delivers A Blow To Binance: What Will Happen With BNB and BUSD Now?
U.S. Securities and Exchange Commission (SEC) recognized the BUSD stablecoin as an unregistered security. Based on this information, The New York State Department of Financial Services asked the emitent of this stablecoin PaxosTrust to stop minting BUSD. SEC has made this decision due to the Howey test, and all further requirements were established under the U.S. Investor Protection Act.
What will happen with BUSD?
According to documents released by the New York State Department of Financial Services regarding the restriction of further issuance of BUSD, this stablecoin as a whole might be banned in the future. And this will bring long legal proceedings. In the future, other stablecoins, like USDC and USDT, may also catch the attention of the SEC.
At the moment, it is important to understand that only the emission of new BUSD tokens has been stopped. This means that already issued BUSD tokens will continue to circulate. Currently, the market has lost one of the ways to invest in cryptocurrencies, but there are still enough other options to continue investing.
For Balanced Scorecard (BSC), this measure reduces the flow of investor funds into the DeFi ecosystem. As for BUSD, this situation may lead to a lack of funds to cover obligations to BUSD stablecon holders. In order to avoid this scenario, PaxosTrust offered BUSD holders to exchange their tokens for the USDP in a 1:1 ratio. The widespread use of the BUSD stablecoin in the way that we were used to today is now impossible, but there is a high probability that Binance will offer to resolve this situation legally.
What about BNB?
Because of the image problems of the largest crypto exchange Binance, Binance Coin (BNB) may experience an outflow of holders due to the lack of clarity at the moment. In this case, the centralized giant will make every effort to maintain the confidence of its investors. At the time of writing, BNB fell only 6% after the bad news. This decrease occurred as a result of the withdrawal of more than $500 million of funds from Binance to other exchanges.
In the event of major implications and multimillion-dollar fines for the Binance exchange, the US division of Binance might get closed. This would be a serious “shake-up” of the financial well-being of the company, but even in this situation, the bankruptcy of Binance is unlikely.
The current situation requires a serious monitoring of what’s happening. BUSD is not a fundamental asset for Binance. Its main task was to simplify the use of services and marketing. But the pressure from the SEC on stablecoins in general, not just BUSD but also on USDT and USDC, could be a serious problem for the entire crypto industry and provoke huge investor withdrawals. The absence of stablecoins will seriously reduce the liquidity of all crypto assets.
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Originally published on our Publish0x blog.