Feb 13, 2023 at 03:16The New York Department of Financial Services (NYDFS) has called on blockchain firm Paxos Trust to halt the release of their Binance USD stablecoin, a digital currency pegged to the value of the US dollar.
This follows hot on the heels of a move by the United States Securities and Exchange Commission (SEC), which sent a warning to Paxos in the form of a “wells notice.”
A ‘wells notice’’ alerts companies to the possibility of enforcement action.
Hence, in this case, the SEC claimed that the Binance USD stablecoin is a security that has yet to be registered.
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Furthermore, the NYDFS has apparently requested that Paxos cease the production of their BUSD token. According to an official statement from Binance, Paxos will still be responsible for handling its redemptions.
Binance USD’s (BUSD) price today is $0.998967, down 0.14% in the last 24 hours.
Rising scrutiny of cryptocurrencies
In similar news, PayPal has decided to suspend the development of a stablecoin due to problems that may arise with the SEC.
Additionally, the SEC recently rocked the boat by declaring that crypto staking services infringe upon securities laws, resulting in Kraken completely shutting down its staking offerings.
However, Coinbase is stepping up to the challenge, insisting that its staking products do not qualify as securities.
The discourse surrounding securities in the cryptocurrency market has been a long-standing issue, brought into sharp focus by the SEC’s lawsuit against Ripple, the creators of the XRP token.
The outcome of this case is still up in the air.
In general, if an individual invests money in a business with the hope of reaping profits from the efforts of someone other than themselves, it is considered a security by definition.
Moreover, the security accusations leveled against stablecoins present a significant obstacle for the cryptocurrency industry.
Granted, these digital assets have become a popular entry point for those just starting to dip their toes into the crypto world.
Parting shot
Although stablecoins are designed to be steady, there could be a variety of opportunities for buyers to profit from arbitrage, hedging, and staking activities.
The SEC has labelled BUSD as an “unregistered security”, and is suing its issuer, Paxos.
But how on earth is a STABLECOIN considered a security, when it clearly doesn’t meet the Howey Test criteria.
No one has ever had “the expectation of profit” when buying $BUSD. pic.twitter.com/QXOlDUyvc3
— Miles Deutscher (@milesdeutscher) February 13, 2023
Nonetheless, the answer is not black and white, but there could be an argument to be made if the stablecoin was established with the aim of generating profits or if it’s derived from a security.
Don’t worry about the BUSD Fud
BUSD not a scam token,
it’s backed by USD 1:1Paxos not issuing any more BUSD
will not effect the existing BUSDIt’s good to stay informed but don’t
make emotional moves.— Ash Crypto (@Ashcryptoreal) February 13, 2023
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