If the SEC targets stablecoins, it could have a significant impact on cryptocurrencies in general.
The US SEC recently turned its attention to stablecoins, a type of cryptocurrency designed to hold its value against a stablecoin like the US dollar.
The commission reportedly plans to sue Paxos, a Blockchain provider that manages BUSD, the third-largest stablecoin on the market, for failing to register the product as a security and ordering Paxos to stop trading in the currency.
This move by the SEC is a new blow to the cryptocurrency industry, which is already known for its volatility. While no formal action has been taken yet, there could be a significant impact on cryptocurrencies in general.
One possible implication of this SEC action is that other stablecoin providers could be tricked into registering as securities and complying with regulations. This could lead to greater transparency and trust in the cryptocurrency industry, but it could also increase costs and make it more difficult for new companies to enter the market.
It is important to remember that Blockchain technology has the potential to revolutionize many industries, including finance, healthcare, and logistics, and regulatory action must be balanced to allow innovation to continue.
Stablecoins Are Under SEC Sights and this Could Affect the Cryptocurrency Market
Paxos, the cryptocurrency company that issues the BUSD stablecoin, received a notice from the SEC in early February that suggested the company was selling its stablecoin as an unregistered security.
As a result, Paxos received an order from the New York regulator to stop issuing BUSD, which is backed by Binance. The NYDFS stated that the request was made due to several unresolved issues related to the supervision of Paxos and its relationship with Binance.
Paxos stated that it categorically disagrees with the SEC staff, as BUSD is not a regulated security under federal securities laws and is prepared to fight rigorously under the law if necessary.
As of January 31, Paxos BUSD had over $16 billion in holdings and has been on the market since 2019, when Binance and Paxos first partnered. However, the drama could escalate soon, as the SEC is considering legal action against Paxos for violating investor protection laws. This could mark a turning point in the cryptocurrency’s battle with regulators.
Can Stablecoins be Understood as Securities?
Recently, there has been a discussion about whether the BUSD stablecoin is a security. The company behind BUSD, Paxos, has argued that the currency is fully backed by US dollar reserves held in safe accounts away from bankruptcy.
However, US regulators are keeping an eye on cryptocurrency companies after the FTX bankruptcy. Coinbase has also been accused by the NYDFS of compliance failures in its AML and know-your-customer standards.
Coinbase agreed to pay $100 million in January to settle the case. This has been a busy month for the crypto industry, and US regulators are increasingly watching the companies that operate within it, determining the paths that may be taken going forward.
By Audy Castaneda
