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Is BUSD slowly dying? This article reviews event critical time nodes and events

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Why did US regulators suddenly strangle BUSDs? The USDts are shivering?

原文标题：《全过程综述：美国监管突然绞杀 BUSD 或走入历史原因是什么？》

原文作者：吴说区块链

Early Tuesday morning (Beijing time), the Wall Street Journal reported that the U.S. Securities and Exchange Commission (SEC) has told Stablecoin company Paxos that it plans to Sue the company for violating investor protection laws. Binance USD, a digital asset issued and listed by Paxos, is an unregistered security, the notice said. Companies that receive Wells notices can respond in writing and tell the SEC why they should not proceed with the case. The Wells notice is not the final indication that the SEC will take enforcement action. The agency's five commissioners must vote to authorize any enforcement settlement or lawsuit. The SEC has not previously taken enforcement action against a major stablecoin issuer.

https://www.wsj.com/articles/crypto-firm-paxos-faces-sec-lawsuit-over-binance-usd-token-8031e7a7?mod=business_minor_pos4

On the afternoon of February 13 (Beijing time), Bloomberg News published a statement by Binance: New York State Department of Financial Services (NYDFS) Paxos has been instructed to stop minting new BUSDs, which are stablecoins wholly owned and managed by Paxos, and the market value of BUSDs will only decline over time. Paxos will continue to service the product and manage redemptions. Paxos also guarantees that the funds are safe and fully covered by its bank's reserves.

https://www.bloomberg.com/news/articles/2023-02-13/binance-says-stablecoin-partner-been-told-to-stop-minting-busd?srnd=c ryptocurrencies-v2

Paxos 表示，自 2 月 21 日起，Paxos 将根据 NYDFS 的指示并与其密切合作，停止发行新的 BUSD Token 。BUSD 将继续得到 Paxos 的全面支持，并且至少在 2024 年 2 月之前可以得到赎回；Paxos 的新客户和现有客户将能够赎回为美元，或将他们的 BUSD Token 转换为 Pax Dollar (USDP)。

https://www.prnewswire.com/news-releases/paxos-will-halt-minting-new-busd-tokens-301744964.html

On the afternoon of the 13th, CZ explained in a detailed post that he had no information about the so-called SEC/Paxos lawsuit other than public news articles. The lawsuit is between the SEC and Paxos. But he, for one, agrees with the logic of the Mile (which makes little sense) : I know that technically it doesn't have to pass the Howey test to be considered a security. The SEC is essentially free to define investable assets as securities if it chooses. But it certainly sets a terrible precedent. The SEC marked BUSD as an "unregistered security" and sued its issuer, Paxos. But how on earth can a STABLECOIN be considered a security when it clearly doesn't meet the Howey test criteria. No one ever bought BusDs with "profit expectations." Xu Mingxing, a longtime rival of CZ, also said he thinks the SEC may not win the case because BUSD certainly has no profit expectations and should not be a security; However, NYDFS can request that BUSD be stopped or that the license of Paxos be suspended.

https://twitter.com/cz_binance/status/1625067484368740353

If BUSD is ruled a security by the court, it could have a profound impact on how the crypto industry develops (or does not develop) in jurisdictions where it does, according to CZ. Binance will continue to support BusDs for the foreseeable future. We do foresee users migrating to other stablecoins over time. We will adjust our products accordingly. For example, BUSD is no longer used as the primary currency counterpart for transactions. Given the ongoing regulatory uncertainty in certain markets, additional programs in these jurisdictions will be reviewed to ensure that our users are protected from any undue harm.

There is a lot of speculation about the reasons. One view is that, combined with Kraken's pledged interest products that were fined by SEC before, Paxos' own stable currency USDP was not in the range of SEC warning, and it is speculated that the US SEC's crackdown on BUSD may be related to its deposit interest products. Circle has a similar product, so it could take a similar hit.

Another view is that "securities" is a broader category defined by the Securities Act of 1933 that includes notes, bonds, debt obligations, certificates of interest, certificates of mortgage trusts, certificates of deposits, and so on, and does not necessarily meet the Howe test strictly. Stablecoin issuers hold underlying Treasury bills, which makes them much like money market funds, giving holders access to the security even if they do not profit from it.

Frank, editor-in-chief of TheBlock, said he would not be surprised if the SEC was reviewing USDC. A few days ago a senior trading platform executive told him that the SEC was working on a "night of Nazi knives" against cryptocurrencies. According to VanEck strategy advisor @gaborgurbacs, Coinbase offers an "incentive" program for USDC users to pay in USDC and use terms such as "APY", "yield" etc. In light of the latest developments in Paxos and Gensler's comments on pledge and yield, The speculation is that the SEC is looking into such issues. The payment of forward returns could be regulated like a fund. Tether CTO also liked the tweet.

https://twitter.com/gaborgurbacs/status/1625139444326998016

In late 2022, Reuters reported that the U.S. Justice Department's investigation into Binance began in 2018 and focused on possible violations of U.S. anti-money laundering laws and sanctions. At least half a dozen federal prosecutors are involved, some believing they have gathered enough evidence to take aggressive action against Binance, others believing they still need time to review more evidence. Binance has met with Justice Department officials in Washington in recent months. The two sides discussed a possible out-of-court settlement, with the option of pleading guilty or paying a fine.

But it's worth noting that CZ emphasized that this is a case between the SEC and Paxos, not Binance. As a result, the redemption process has begun, and the BUSD with a market value of tens of billions seems to have been completely abandoned. The possibility of future reconciliation is not large. In response to the "suggestion that Binance make their own decentralized DAI like Stablecoin next," CZ said, "At this point, we would prefer someone else to do it, to make it more... Decentralization. We can't do everything. This expression seems to have some hidden meaning.

Subsequent reports from NYDFS and Bloomberg explain more. The reason why NYDFS requested to stop BUSD seems to have nothing to do with the securities identification and pledge of Stablecoin. The real reason seems to be Binance-Peg BUSD, Circle complaints and Paxos's poor response.

The NYDFS statement stated that it has ordered Paxos to stop casting PaxOS-issued BusDs because Paxos has several unresolved issues regarding PaxOS-issued BusDs monitoring its relationship with Binance. NYDFS emphasized that Paxos is authorized to issue BUSDs on the Ethereum blockchain, but the department has not authorized Binance-Peg BusDs on any blockchain.

https://www.dfs.ny.gov/consumers/alerts/Paxos_and_Binance

据彭博社报道，Circle 去年秋天向 NYDFS 投诉Binance对其自有 Token 的储备管理不善，表明 Binance 没有存储足够的加密储备来支持它的 Token 。NYDFS 确定 Paxos 无法「基于广泛的监管参与、最近的检查以及 Paxos 未能及时补救与 Paxos 发行的 BUSD 相关的重大问题」以安全稳健的方式运营 BUSD。「Paxos 未能解决关键缺陷，需要部门采取进一步行动，命令 Paxos 停止铸造 Paxos 发行的 BUSD。该部门正在密切监控 Paxos，以验证该公司是否能够以有序的方式促进赎回，并遵守增强的、基于风险的合规协议」。

https://news.bloomberglaw.com/securities-law/stablecoin-issuer-circle-warned-ny-watchdog-about-binance-token

Attorney Collins Belton interpreted it as if NYDFS 'real motive was actually Binance Pegged BUSD, arguing that it was not supported by the full reserve. It wasn't until late last year that Peg BUSD's relationship with Paxos was most clearly revealed. The SEC is likely to approach the issue from the same Angle. So a better outcome would be a reduced impact on other crypto stablecoins (and perhaps no knock-on effects).