Coinbase, a prominent cryptocurrency exchange in the U.S., has announced the suspension of Binance USD (BUSD) trading, coinciding with the U.S. Securities and Exchange Commission (SEC) categorizing the stablecoin as a security.
This move by Coinbase makes it the first major U.S.-based cryptocurrency exchange to distance itself from BUSD after the regulatory action by the SEC was revealed.
According to Coinbase’s recent announcement, the trading of Binance USD (BUSD) will be temporarily halted on March 13, 2023, across all its platforms, including Coinbase.com, Coinbase Pro, Coinbase Exchange, and Coinbase Prime. However, users will still have the option to withdraw their BUSD coins at any time during the suspension.
We regularly monitor the assets on our exchange to ensure they meet our listing standards. Based on our most recent reviews, Coinbase will suspend trading for Binance USD (BUSD) on March 13, 2023, on or around 12pm ET.
— Coinbase Assets (@CoinbaseAssets) February 27, 2023
At present, the announcement by Coinbase to suspend trading of Binance USD (BUSD) has not affected the stablecoin’s market position. As per CoinMarketCap data, BUSD continues to hold the third spot among the leading stablecoins in the market. Additionally, the coin’s value is still pegged to the US dollar.
There is no official statement from Coinbase that directly links the suspension of BUSD trading to the SEC labeling the stablecoin as a security. However, it is widely speculated that this move is a response to regulatory pressure on stablecoins, especially after the SEC’s recent actions against the controversial stablecoin issuer, Tether. It is also worth noting that Coinbase has a history of complying with regulatory requirements and has stated its intention to work with regulators to ensure compliance.
SEC taking action against Paxos and Binance
On February 13, 2023, the SEC issued a Wells notice to Paxos Trust Company, the issuer of BUSD, indicating that the commission was “considering recommending an action” that would require the stablecoin to be registered under federal securities laws. However, Paxos disputed this claim, arguing that BUSD is not a security, and pledged to defend its position through litigation if necessary. As of February 18, 2023, Paxos CEO Charles Cascarilla reported that the company was engaged in “constructive discussions” with the SEC.
In addition to the SEC’s regulatory action, the New York Department of Financial Services ordered Paxos to cease minting Binance USD due to “several unresolved issues related to Paxos’ oversight of its relationship with Binance regarding Paxos-issued BUSD.” Paxos has since terminated its partnership with Binance, citing changing market conditions as the reason.
Despite these developments, BUSD remains the third largest stablecoin in the market and maintains its dollar peg. However, the situation highlights the ongoing need for regulatory oversight in the crypto industry in order to ensure investor protection and stability.