Binance Coin (BNB), created and issued by the exchange Binance has suffered a massive drop in its price action. The crash follows an investigation from the U.S. Securities and Exchange Commission (SEC) against crypto firm Paxos, which supports Binance stablecoin’s BUSD.
According to a report by The Wall Street Journal, the SEC has told crypto firm Paxos that it plans to sue the company for “violating investor protection laws.” This investigation follows a last week’s settlement with crypto exchange Kraken over its staking program in what appears to be a regulatory escalation against the industry.
BNB Affected By The Ongoing SEC Enforcement Actions
The US government’s watchdog has told Paxos in a Wells Notice that Binance USD is an unregistered security. SEC Chairman Gary Gensler has stated on several occasions that crypto companies must provide “full disclosure information about their financial products.”
The New York State Department of Financial Services (NYDFS) ordered Paxos in a blog posted on the official page to cease minting Paxos-issued BUSDs due to “several unresolved” issues related to Paxos’ oversight of its relationship with Binance for Paxos-issued BUSDs.
The Department of Financial Services is currently monitoring Paxos to verify the company’s redemption in an “orderly fashion subject” to enhance risk-based compliance protocols.
Paxos has informed its customers that it will no longer be minting new BUSD tokens. The regulated blockchain and tokenization infrastructure platform recently announced that it would end its relationship with Binance for the BUSD-branded stablecoin.
Effective February 21, Paxos will cease issuing BUSD tokens in close coordination with the New York Department of Financial Services. The firm stated the following in a blog post:
Paxos has always prioritized the safety of its customers’ assets. That was true at our founding and remains true today. BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024. New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust.
In this matter, Binance CEO Changpeng Zhao “CZ” has addressed the case on social media Twitter, stating that as a result of Paxos’s recent decision against issuing BUSD, the token’s market cap will only decrease over time.
In addition, CZ said that he foresees users migrating to other stablecoins over time. For CZ, If BUSD is ruled as a security by the U.S. courts, it will have a profound impact on how the crypto industry will develop or not in the jurisdictions it’s ruled as such. The Binance CEO stated:
Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm.
BNB is currently trading at $285.9, representing a decline of over 11% in the last 24 hours and 13% in the last seven days.
After the latest news, BNB’s price has plummeted, and if it fails to hold the support at the $260 level, it may face a further retracement to the $219 level, which could operate as the next support line for the Binance token.
Featured image from Unsplash, chart from Tradingview.