The U.S. Securities and Exchange Commission (SEC) has criticized Paxos, a regulated stablecoin issuer, over its stablecoin, BUSD, which is used by cryptocurrency exchange Binance.
In response to the news that the SEC has sued Paxos over BUSD, Binance’s BNB token plunged from $310 to $290, according to a Twitter thread by cryptocurrency YouTuber Crypto Jargon.
Although BUSD does not use the name or branding of Binance, the exchange does use it. According to Binance, Paxos will continue to oversee the redemption of BUSD and is governed by the New York State Department of Financial Services. The SEC’s claim that BUSD is an unregistered security has, however, led to the peg of the coin falling.
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BUSD is not associated with Binance other than by name, and new BUSD will not be issued as instructed by the SEC, according to Binance CEO Changpeng Zhao (CZ), who also verified this in a thread. As users switch to other stablecoins, the market cap of BUSD is anticipated to decline, and its future is still up in the air. Investors are therefore recommended to diversify their holdings in stablecoins rather than keeping all of their money in one stablecoin, which increases risk.
How this will impact Binance’s operations and if the SEC will pursue further legal action against the exchange remain to be seen. The development of this case will be widely watched by the crypto world.