The SEC has labeled 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.
The SEC’s lawsuit against Paxos, the issuer of $BUSD, highlights the ongoing regulatory uncertainty in the cryptocurrency space and the need for clarity and consistency in the treatment of cryptocurrencies and stablecoins. Regardless of whether stablecoins like BUSD meet the criteria of the Howey Test, it is important for the industry to work with regulators to establish clear guidelines and regulations for the use and issuance of stablecoins.
Adam Cochran tweeted on microblogging platform Twitter that; Howey test = precedent for investment contracts. “Securities” is a much broader category defined by the 1933 Securities Act.
Honestly, if the SEC wants to, with how vague the Act is, it’s fairly easy to put anything under it. note, debenture, evidence of indebtedness, certificate of interest, collateral trust certificate, certificate of deposit, rights, or in general any interest or instrument known as a security, or certificate of interest or participation in, or right to.
The fact that these assets hold underlying treasuries, makes them a lot like a money market fund, exposing holders to a security, even if they don’t earn from it. Making an argument (not one I agree with, but a reasonable enough one) that they can be a security.
However, Changpeng Zhao, CEO at Binance, insisted on Twitter that “BUSD, even though called Binance USD, is NOT issued or redeemed by Binance. BUSD is issued and redeemed by Paxos. And funds are”. Paxos has been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS).
Paxos is regulated by NYDFS and BUSD is a stablecoin wholly owned and managed by Paxos. As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, and manage redemptions. Paxos also assured us the funds are SAFU, and fully covered by reserves in their banks, with their reserves audited many times by various audit firms already.
“IF” BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such. Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc. Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm.
What about the reserve funds of binance, There are more BUSD allocated in the exchange than that of BNB so what happens if BUSD dumps? More than 16% of Binance reserve was allocated to BUSD the PoR was earlier displayed on CoinMarketCap but not anymore.
In a different twist, the Legendary “Bullish DTMP Pattern” has just appeared for the first time on the charts since 2020. The BDMP Pattern is characterized by;
- A large dump usually preceded by months of declining price
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Complete reduction of volatility that appears as near perfect sideways or crab price action
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A large pump that engulfs the previous dump price action that came right before volatility obliteration
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A slight pullback that does not breach below original dump pattern
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If 1,2,3 and 4 hold true, the next phase of this pattern is a breakout to the target (for this setup specifically, is around $27,000 per Bitcoin.
BNB, Matic and Cosmo Plummet as BUSD Depegs following SEC’s Overhang
Meanwhile, following the recent Security and Exchange Commission [SEC] fiasco classifying BUSD as an unregistered security, the price of BNB the native token of Crypto Exchange Binance has tanked in the red, few hours after the news of SEC suing Paxos Issuer of the BUSD Stablecoin. Currently BNB is trading at $288, a negative of -10% compared to its early Monday price of $321 while the Binance Stablecoin BUSD Depegs to $0.96/7 range on the four hours chart stretch.
Circle, the issuer of USDC, ratified the Binance-pegged USD— BUSD months ago. Blockchain is transparent they say Zhao knows it and allowed the opposite anyways, the outburst on Paxos is precipitating a bank run on Binance.
Polygon (MATIC) dropped by as much as 10% to start the week, as the global cryptocurrency market cap plunged on Monday. Following a high of $1.29 on Sunday, MATIC/USD slipped to an intraday low of $1.16 earlier today. Today’s move saw the token fall to its lowest level since February 1, when MATIC was trading at a bottom of $1.06.
Cosmos $ATOM was another notable mover on Monday, as it also dropped to a multi-week low. ATOM/USD fell to a floor of $12.85 earlier in the day, which comes less than 24 hours after trading at $13.94. Monday’s drop in price sees ATOM trade at its weakest point since January 30, when the token bottomed out at $12.78.
Interestingly, the ATOM Prop95 proposal has passed, the proposal introduces a Grant Program for the Cosmos Hub —ATOMAccelerator. The primary goal of the Program is to drive value to ATOM by providing an alternative source of funding.
