The CEO of Binance, Changpeng Zhao, most commonly known as “CZ,” has recently made a bold prediction about the future of stablecoins in the crypto industry. He believes that US dollar-based stablecoins may soon be replaced by non-dollar-based stablecoins, such as euro or yen-backed tokens.
This comes on the heels of news that the New York Department of Financial Services (NYDFS) has ordered Paxos, the issuer of Binance stablecoin BUSD, to halt its issuance of the US dollar-pegged token.
Additionally, the US Securities and Exchange Commission (SEC) has issued Paxos Trust Co. a Wells notice, signaling its plan to sue the company over allegations that BUSD is an unregistered security.
Despite the potential legal action, CZ has assured customers that their funds are safe, as Paxos is owned and managed by Paxos and is subject to oversight by the NYDFS. Furthermore, Paxos has guaranteed its reserves, which independent auditors have verified.
CZ also confirmed that Binance would continue to offer the stablecoin on its exchange, even though users may migrate to other stablecoin tokens due to the enforcement action.
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BUSD is NOT a Security – Paxos
There is a disagreement among regulators and Paxos, the issuer of the stablecoin BUSD, regarding whether BUSD is a security under federal securities laws. Paxos categorically disagrees and states that BUSD is not a security under federal securities laws.
Paxos claims that BUSD is always backed 1:1 with the US dollar. This means that for every BUSD token in circulation, there is an equivalent amount of US dollars held in reserve, which should help to ensure the stability of the stablecoin.
BUSD is also regulated by the NYDFS and issued by Paxos, which is a regulated blockchain infrastructure platform. This may also provide some assurance that BUSD is a legitimate and reliable stablecoin.
Furthermore, Paxos emphasized that the SEC Wells notice pertains only to BUSD, and there are no other allegations against the company. Paxos has always put first the safety of its customers’ assets.
In summary, the issue of whether BUSD is a security under federal securities laws is currently being debated between regulators and Paxos, with Paxos strongly disagreeing with the characterization. As of now, there is no definitive answer, but this is an ongoing situation, and more information may become available in the future.
