BUSD labeled as unregistered security by SEC

[rhomelmabini]

This is somehow confusing considering NYDFS authorized Paxos¹ before and now they investigate it², and then SEC labeled them as unregistered security. They need to cooperate with one another tbh, they just want to stir the market with FUD. I wonder why the SEC labeled them as security when there's really "no expectations to profit" for BUSD.

1. https://www.dfs.ny.gov/reports_and_publications/press_releases/pr1909051
2. https://www.thecoinrepublic.com/2023/02/10/new-york-regulator-investigates-stablecoin-issuer-paxos/

[1715432497]

1715432497

[Apocollapse]

You need to know if Securities and Exchange Comission (SEC) and New York State Department of Financial Services (NYDFS) are have different way to regulating crypto. NYDFS was accepting BUSD because the reserve of assets that backed BUSD is following the NYDFS rule. SEC might be strict especially the US treasury bills used to backed BUSD is quite small for 21% while USDT have backed by 71% of US treasury bills [1].

Last year, the regulator published guidance to stablecoin issuers, stating that US dollar-backed stablecoins must be fully backed by a reserve of assets. Reserves should only consist of US Treasury bills, reverse repurchase agreements collateralized by Treasury bills or notes, government money-market funds or deposit accounts at US state or federally chartered institutions.

According to Paxos’ latest reserve report, BUSD is backed by $636 million (4%) in cash, $12 billion in Treasury-collateralized reverse repurchase agreements (75%) and $3.3 billion in US Treasury bills (21%).

[1] https://tether.to/en/transparency/#reports

[tvplus006]

More recently, many people, including me, considered BUSD a safe stablecoin, as they mistakenly believed that this stablecoin was imitated by the Binance cryptocurrency exchange. According to the Paxos statement, "BUSD will continue to be redeemable through at least February 2024 for U.S. dollars or Paxos’ own stablecoin, Pax Dollar" - https://www.wsj.com/articles/crypto-firm-paxos-to-stop-issuing-dollar-pegged-binance-token-94f65e52 What will happen to other stablecoins in this case?

[vv181]

The press release of the compliance is released on 5th September 2019, while the investigation is just happening recently on 10th February 2023. That is tolerable since it is expected that when more and more people playing out within cryptocurrency spaces, the regulator or authority will keep an eye on it. Do also note, the recent FTX fiasco event is a kind of wake-up call for the regulator.

So, it is well understood that in this case regulator are trying to catch up with how stablecoins utilization progresses among its people or reflecting on other countries since it being used widely.

[Yogee]

....I wonder why the SEC labeled them as security when there's really "no expectations to profit" for BUSD.

It does sound absurd to even think that converting your fiat into a stable coin would guarantee a profit. It also feels like SEC is flexing and trying to force their way by breaking their own rules. This move must be related to their other recent activities which is going after crypto staking. BUSD on a staking pool would generate profit and that's probably where SEC is attacking.

[bittraffic]

You need to know if Securities and Exchange Comission (SEC) and New York State Department of Financial Services (NYDFS) are have different way to regulating crypto. NYDFS was accepting BUSD because the reserve of assets that backed BUSD is following the NYDFS rule. SEC might be strict especially the US treasury bills used to backed BUSD is quite small for 21% while USDT have backed by 71% of US treasury bills [1].

Last year, the regulator published guidance to stablecoin issuers, stating that US dollar-backed stablecoins must be fully backed by a reserve of assets. Reserves should only consist of US Treasury bills, reverse repurchase agreements collateralized by Treasury bills or notes, government money-market funds or deposit accounts at US state or federally chartered institutions.

According to Paxos’ latest reserve report, BUSD is backed by $636 million (4%) in cash, $12 billion in Treasury-collateralized reverse repurchase agreements (75%) and $3.3 billion in US Treasury bills (21%).

[1] https://tether.to/en/transparency/#reports

It's a sure thing CZ understands this has to be backed by US Dollar. He knows very well that USDT was also questioned if it's fully backed by reserves. To which Paxos can back the claim.

Also, SEC can only consider a token a security if investors expect to profit from it but this is a stablecoin.  This is something they can't argue but this is to question Paxos not binance.

[rhomelmabini]

So, it is well understood that in this case regulator are trying to catch up with how stablecoins utilization progresses among its people or reflecting on other countries since it being used widely.

But to label a stablecoin as security is the thing here, it doesn't even passed the Howey Test criteria. Nothing is to be expected for profit while buying BUSD. It feels like the SEC want to just rule whatever they please to do.

[Bialke]

Today one big argument about Stablecoins is: "Stablecoins are no investment."

But this is fan's blindness or a blank lie (in some cases): The stability of Stablecoins is about to trade the Arbitrage. This is the way to keep it stable.

[Yogee]

Today one big argument about Stablecoins is: "Stablecoins are no investment."

But this is fan's blindness or a blank lie (in some cases): The stability of Stablecoins is about to trade the Arbitrage. This is the way to keep it stable.

Isn't that just too vague to be used as a reason for calling BUSD as a security? Remember that SEC has set up the Howey test so which one did BUSD fail at? And what kind of securities does BUSD fall? Is it derivatives?

They should probably update their definition and coverage of securitiea first.

[tvplus006]

Today one big argument about Stablecoins is: "Stablecoins are no investment."

But this is fan's blindness or a blank lie (in some cases): The stability of Stablecoins is about to trade the Arbitrage. This is the way to keep it stable.

Isn't that just too vague to be used as a reason for calling BUSD as a security? Remember that SEC has set up the Howey test so which one did BUSD fail at? And what kind of securities does BUSD fall? Is it derivatives?

They should probably update their definition and coverage of securitiea first.

I am surprised by the fact that Paxos Trust Company did not even try to challenge the SEC assertion in court, but immediately agreed to stop the release of BUSD and has already started burning this stablecoin - https://etherscan.io/tx/0xcaefe0fa62e58eaa0ae18e66cf1923d2f70b8d635ca290a321d6beefe8277725. We are not yet fully aware of the consequences that this decision will entail.

[JANUS23]

It was USDC's Circle that told on Paxos and BUSD. I would still continue to use BUSD as long as its pegged to the USD and therefore legit

[rhomelmabini]

It was USDC's Circle that told on Paxos and BUSD. I would still continue to use BUSD as long as its pegged to the USD and therefore legit

Outside in the US I think it's still usable but I think it's fair and safe to just not use until we see some light about their case. For me, I will use it especially on Binance but refrain from holding it on my personal wallet, it's best that it will be on the exchange because if something happens on news you can still exchange immediately there.

[DeathAngel]

Let’s be honest here, BUSD is an unregistered security. I don’t see how it can be categorised as anything else except a security. It is literally just printed out of nothing by one centralised entity (the $ is too).

BUSD is not a bad investment but under no circumstances is it 100% safe. CS is trustworthy until he’s not, that’s how it goes.

[hd49728]

You need to know if Securities and Exchange Comission (SEC) and New York State Department of Financial Services (NYDFS) are have different way to regulating crypto. NYDFS was accepting BUSD because the reserve of assets that backed BUSD is following the NYDFS rule. SEC might be strict especially the US treasury bills used to backed BUSD is quite small for 21% while USDT have backed by 71% of US treasury bills [1].

Even in the US. there are competitions between many governmental organizations to regulate cryptocurrencies and cryptocurrency market. There is no clear guide and Act to regulate those things.

I think your information is meaningful and it points out a big difference between USDT and BUSD in US treasury bills backed those stable coins. Even if BUSD gets serious trouble, there will be way to handle it. Pay money for SEC like some cryptocurrency projects did in the past like Tezos XTZ. It won't kill BUSD entirely and the stablecoin will continue its existence in cryptocurrency market.

[el kaka22]

SEC likes to have some control, and when there is something that they can't control, they like to discredit it and consider it as illegal as they could possibly make. In this case, BUSD is pegged to dollar, and Binance doesn't really care about US government because they are not based there, which causes the troubles.

USDT is also not based in USA neither, but they at least respond when called upon, which tells SEC that they could just call them up and control them, but they can't do that with Binance, which means they had to threaten them with BUSD and make it a security to make sure Binance realizes they can't play this game, US is much bigger than they could ever be.

[BitcoinPanther]

So, it is well understood that in this case regulator are trying to catch up with how stablecoins utilization progresses among its people or reflecting on other countries since it being used widely.

But to label a stablecoin as security is the thing here, it doesn't even passed the Howey Test criteria. Nothing is to be expected for profit while buying BUSD. It feels like the SEC want to just rule whatever they please to do.

Why do I feel that SEC wanted to profit from this case?  For sure they will put a lot of charges on BUSD and even  penalized it through fines.  I do agree, SEC just wanted to rule whatever they please to do, they had their way to milk the cryptocurrency industry and they will surely do it.

SEC likes to have some control, and when there is something that they can't control, they like to discredit it and consider it as illegal as they could possibly make. In this case, BUSD is pegged to dollar, and Binance doesn't really care about US government because they are not based there, which causes the troubles.

Well, since they can't control BUSD they have to discredit it to show their authority, but sadly to them, BUSD isn't base in USA so I do not think that CZ would care that much.

[Captain Corporate]

Having an understanding of how SEC works is a bit hard to do. Because at the end of the day we are talking about an organization tied to government and yet they have some sort of independent control over the situation as well. I am guessing that the best thing we could handle right now would be try to avoid them both when calling the situation and also at the same time making sure that we do not end up with anything that would go down or up at the same time. and just ignore them basically, if we can do that, then SEC would lose all of their power. I understand Americans may not, but we can ignore them.