Coinbase will suspend Binance USD trading starting next month after the SEC targeted the stablecoin, the crypto exchange said Monday.
Starting March 13, Coinbase will no longer offer Binance USD (BUSD) trades. Currently, the exchange does not offer any crypto trading pairs with BUSD; the only pair supported in some jurisdictions is BUSD/USD, according to Coinbase as of Feb. 17, 2023. Still, the USD pair is blocked in certain locations, including New York and Germany.
CoinGecko reports Coinbase makes up 0.01% of total BUSD/USD volume. The most popular trading pair, BUSD and bitcoin (BTC), is only available on select exchanges, including the token’s native Binance.
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The suspension comes after the SEC issued a Wells notice, which precedes an enforcement action, to Paxos alleging BUSD is a security. Paxos delisted the stablecoin in response.
Given the regulatory pressure BUSD is facing, suspending trading is a good opportunity for Coinbase to make a move the SEC will appreciate without much of a downside, considering BUSD’s low volume on the exchange.
“The important thing to highlight here is that Coinbase is reacting to the possibility and likelihood that BUSD will be ruled a security by the SEC,” Timothy Cradle, director of regulatory affairs at Blockchain Intelligence Group, said. “Other U.S. exchanges will follow suit in the coming weeks. This is a replay of the ripple’s delisting from two years ago.”
Ripple has been battling with the SEC over its token classification since 2020 . A summary judgment is expected sometime this year, although virtually every exchange available to US traders has delisted the token.
Coinbase’s decision to move away from BUSD is proactive from a regulatory perspective, Cradle said.
“The issue for Coinbase is that they were selling BUSD on their exchange and if this is determined to be a security then Coinbase would be liable for selling an unregistered security once the SEC completes the case or settles with Paxos,” Cradle said. “Obviously Coinbase doesn’t want to be determined to be (what they may be anyway) an unregistered securities exchange.”
Coinbase launched USD coin (USDC) with Circle via the Centre Consortium in 2018, which has since grown to the second-largest stablecoin after tether (USDT).
USDC’s token classification has not been a subject of public SEC investigation since it was launched and Circle and Coinbase have denied being issued any Wells notice regarding the stablecoin.