Binance CEO Changpeng Zhao on the BUSD ban
The Wall Street Journal on February 13 said Paxos Global (the manager of Binance's stablecoin BUSD) must stop issuing tokens.
According to the Wall Street Journal from February 13, Paxos Global (the manager of Binance's stablecoin BUSD) must stop issuing tokens. The order from U.S. authorities had an immediate negative impact on prices. Both the New York Department of Financial Services (NYDFS) and the SEC have taken action against Paxos Global.
As a result, the prices of most cryptocurrencies slid, including Binance tokens like BNB and BUSD. The latter stablecoin has since decoupled from the U.S. dollar and is currently trading just below the $1 level. When confusion arose about the stablecoin's peg, Binance CEO Changpeng Zhao (CZ) felt compelled to speak out. He posted a status update on Twitter.
CZ: " Funds are SAFU "
First, CZ assured users that customer funds are safe despite the regulatory actions. The BUSD stablecoin is managed and issued by Paxos Trust, a regulated financial services provider under strict rules. Binance merely lends its name to the stablecoin.
Although the NYDFS has prohibited further issuance of the BUSD stablecoin, Paxos still has the authority to redeem tokens. The reserves required are "fully backed" and certified by "numerous audits by various accountants," according to Zhao.
According to a Paxos press release, the issuance of BUSD will not be stopped immediately but will pause starting February 21. Paxos also keeps its dollar reserves separate and is therefore protected against a potential company insolvency.
CZ did concede that the stablecoin’s market cap could "only go down" as a result. While Binance continues to recommend using BUSD, he sees users eventually shifting to other stablecoin alternatives. Paxos itself stated that it can guarantee the exchange of BUSD at least through February 2024. Customers can also switch to the company’s other stablecoin, USDP.
Lawsuit against Paxos?
Meanwhile, CZ had no information about a possible lawsuit against Paxos by the SEC. The market regulator could accuse the BUSD operator of violating securities laws. The charge, however, is not warranted, according to Zhao. Since holding a stablecoin for speculative purposes makes little sense, the SEC would have a hard time applying its previous criteria. As a result, the issuance of BUSD would actually not be a securities transaction according to Changpeng Zhao.
If BUSD were to be deemed a security, CZ said there would be "significant consequences" for the development of the crypto sector. Moving forward, the space will be on alert and watch similar projects in other regions to protect customers from "unnecessary harm," CZ added.
