Coinbase to Suspend Binance USD Trading Amid Regulatory Scrutiny
The move follows Paxos Trust’s decision to stop minting the Binance-branded stablecoin, citing pressure from the SEC.
Coinbase, one of the largest cryptocurrency exchanges in the world, has announced that it will suspend trading for Binance USD (BUSD) on March 13. The decision comes after Paxos Trust, which oversees the backing of BUSD, announced it would stop minting the Binance-branded stablecoin due to regulatory pressure from the Securities and Exchange Commission (SEC).
Coinbase has indicated that an internal review influenced its choice to halt BUSD trading, explaining that the stablecoin no longer meets the exchange’s listing standards. According to a representative from Coinbase, “Our decision to suspend trading for BUSD is based on our internal monitoring and review processes.”
According to data from CoinGecko, BUSD has a total value of around $10 billion, making it the third-largest stablecoin by market capitalization. It was launched in 2019 through a licensing agreement between Paxos and Binance, the largest cryptocurrency exchange by volume. BUSD was listed on Coinbase’s platform in April of last year.
Paxos Trust’s Decision to Stop Minting BUSD
Paxos Trust has owned and operated BUSD since its inception, but the SEC’s pressure over investor protection laws has led the company to “end its relationship with Binance.” The SEC plans to sue Paxos for violating investor protection laws by issuing BUSD, which aims to track the price of the dollar through reserves of financial assets.
Binance’s CEO Changpeng Zhao has stated that Paxos was also ordered to stop issuing BUSD by one of its primary regulators, the New York Department of Financial Services (NYDFS). While Paxos oversees the backing of BUSD issued on Ethereum, it does not do the same for the BUSD issued by Binance on the exchange’s proprietary network Binance Smart Chain.
Binance Claims BUSD Tokens are Fully Collateralized
Binance asserts that it ensures the authenticity of BUSD circulating on its network by backing it fully with Paxos-regulated BUSD. Nevertheless, the collateralization has faltered on several occasions, with Binance acknowledging that it has experienced “delays” in securing sufficient capital. Decrypt reached out to Binance for comments, but the exchange has not responded yet.
Coinbase’s Attempt to Avoid Regulatory Scrutiny
According to Timothy Cradle, who serves as the Director of Regulatory Affairs at Blockchain Intelligence Group, Coinbase’s move to suspend BUSD trading is possibly aimed at evading regulatory scrutiny that could accuse the exchange of promoting unregistered securities. Cradle believes that Coinbase is making a prudent decision as he expects a settlement to be reached soon, and the cease-and-desist order could become relatively permanent, requiring Paxos to register with the SEC if it intends to reintroduce the coin.
In 2020, several exchanges, including Coinbase, adopted comparable steps after the Securities and Exchange Commission accused Ripple Labs of generating $1.3 billion in unregistered securities sales through the XRP token. The legal tussle between Ripple Labs and the SEC is still ongoing.
Conclusion
In conclusion, Coinbase has announced its decision to suspend trading for Binance USD (BUSD) on March 13, citing a recent internal review that revealed the stablecoin no longer meets its listing standards. The announcement follows Paxos Trust’s disclosure that it would stop minting the Binance-branded stablecoin due to regulatory pressure from the SEC. Experts suggests that Coinbase’s decision is likely an attempt to avoid regulatory scrutiny that may accuse the exchange of facilitating the sale of unregulated securities.
BUSD is the third-largest stablecoin by market capitalization, with a total value of around $10 billion, behind Tether’s USDT and Circle’s USDC stablecoins. The legal tussle between Ripple Labs and the SEC in 2020 led to several exchanges, including Coinbase, suspending trading of XRP. The current legal dispute between the SEC and Paxos over BUSD continues, but many believe it will result in a settlement, leading Paxos to register with the SEC to relaunch the coin.
Disclaimer:
The information provided in this conversation is for educational and informational purposes only. It should not be construed as financial, legal or investment advice. Cryptocurrency is a highly volatile and speculative market and the value of cryptocurrencies can fluctuate widely. Therefore, you should always do your own research and seek professional advice before making any financial decisions.
