Confusion in Crypto when the US cracks


American securities And the Exchange Commission is at war — and crypto is on the cross. at the end of the week, of Wall Street Journal The agency reportedly plans to sue crypto firm Paxos for issuing BUSD.

The SEC declined to comment, but Paxos, based in New York and Singapore, confirmed today that the agency had to register BUSD as a security in the US, which requires compliance with complex regulations. In a statement, the firm “does not agree” that BUSD is a security, but accepted an order from New York’s Department of Financial Services to stop creating any new BUSD, effectively suffocating the coin.

Paxos did not respond to a request for comment. Patrick Hillman, Binance’s chief strategy officer, declined to comment on how the SEC’s action would affect the exchange, but said the company will “evaluate other projects to ensure users are protected from further harm.”

The crypto industry is no stranger to clashes with regulators, but the case of Paxos is different – ​​and it has caused some consternation and confusion. The concern sets the precedent that a ruling prohibiting the withdrawal or use of BUSD can be enforced. all of them Stable Coin has hit a critical infrastructure in many crypto markets. Francis Coppola, who previously worked at HSBC and other banks, said: “If the supply suddenly dries up, the crypto economy will collapse.”

Designed to be pegged to a fixed value, usually $1, stablecoins are a vital pillar of the crypto economy. Most of them are backed by a combination of cash and bonds, which allows the tokens to move to the desired value.

Unlike cash, which can be difficult to move, especially across borders, stablecoins are “easy and fast,” said crypto analyst Noel Acheson, previously at CoinDesk, helping traders jump on opportunities as they arise. Ram Ahluwalia, chief executive of wealth management firm Lumida, says they have “opened an economy on a chain” by allowing it to “enter and stay in the ecosystem”.

The SEC defines securities as contracts “to invest money in a joint venture, with the expectation of a reasonable return, derived from the efforts of others.” The classification brings with it different regulatory and disclosure requirements. If stablecoins were decided to be securities in general, issuers would be required to register with the SEC, which would give the agency the option to reject the coins. Any stable coins in the market are subject to enforcement action.

Dear members of the crypto industry, Including Binance CEO Changpeng ZhaoNow they are asking how stablecoins can meet SEC requirements, and especially how crypto coins designed to not fluctuate in value can be sold at a reasonable profit.

But the move against a major stablecoin issuer is not surprising, Acheson said, because the SEC has on several occasions believed that some stablecoins qualify as securities. Acheson argues that the regulator, stablecoins such as BUSD, are backed by established securities such as government and corporate bonds, which are themselves backed by collateral and should be regulated accordingly.


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