Now we turn to Binance for the latest updates on the BUSD lawsuit between Paxos and the SEC with Changpeng Zhao, commonly known as CZ in the industry, who is the CEO of Binance that uses the BUSD stablecoin. Paxos is the issuer and auditor of the BUSD stablecoin, and the SEC is pursuing legal action against it after labeling it an unregistered security. This has significant implications for Binance, which relies on the BUSD stablecoin for its entire ecosystem, as billions of BUSD are used in Ethereum for trading on Binance. With the SEC going after Paxos, the issuer of BUSD, it could spell trouble for Binance. CZ mentioned on Twitter spaces that they are distancing themselves from the issue, stating that they did not create the BUSD, and Paxos is solely responsible for its creation, as they are only licensing their name to use it. While this is an interesting stance, it is more important for Binance than it initially seemed, and has broader repercussions for the crypto industry
Stablecoins are the denominator for all trading activities. If you want to buy ether or any other coin, you can use a stablecoin instead of Bitcoin. Nowadays, BUSD is one of the three largest stablecoins. However, if the SEC takes action against stablecoins like Paxos, labeling them as unregistered securities, it could cause significant problems for the crypto industry. So, is this FUD or not? From a trader’s perspective, this is actually quite bearish, and personnally I have a lot of thoughts on the matter
In the early days of cryptocurrency, people always traded with BTC pairs, and we had to learn how to do the conversion calculations. Then, over time, stablecoins emerged, and it became cool to have more stablecoin options to trade, depending on the exchange you use. For a long time, there was only Tether, and it was complex because not all exchanges had it.
The US government needs to have complete control before they can issue a CBDC, and most people do think the stablecoin or the CBDC will be USDC for various reasons. However, people don’t like all the drama happening with stablecoins. We do need stablecoins because they make trading and investing a lot easier for average folks, as they don’t have to convert currencies all the time. Even though people are not happy about the drama behind the scenes, it is just part of crypto.
Binance experienced a massive user withdrawal of 831 million USD in the past 24 hours as of February 14th, 2023. This is not the first time we’ve seen a large amount of withdrawals from Binance, especially with the current situation surrounding centralized exchanges. Let’s say that Binance was going through a similar situation with regulations. Things eventually eased up with Binance, but now CZ is back out here in the public, just trying to avoid any negative impact. So far, he’s doing a good job, as Binance is demonstrating their ability to handle large withdrawals. However, they are still vulnerable to negative news related to centralized exchanges and regulatory issues. I support Binance during this segment and acknowledge that I think they have done an excellent job handling everything that has come their way.
It needs clarification that people think there are two BUSDs. There’s the proper BUSD with reserves that exists through Paxos, and there’s also the BUSD that exists on the BNB chain. So, there is some confusion occurring here. However, we are all glad that CZ is out and talking about this. Bringing it up quickly, there is a Reuters report from early January that disclosed a one billion shortfall in BUSD in its history. So, not currently, but in its history, there has been a shortfall that was not caught by the Binance team. We need stablecoins, but we should be wise in our stablecoin investments. This does not instill confidence in the whole stablecoin regime.