The market cap of the once-major stablecoin BUSD has declined by more than 60% since hitting an all-time high of $23.04 billion in November 2022. This is due to the regulatory tussle it is embroiled in with the United States Securities and Exchange Commission (SEC). Adam Cochran believes the SEC suggesting Binance is an unregistered securities exchange on the grounds BUSD is unregistered security is “brutal 4D chess”. Binance has two options – to settle or be open to discovery by a US agency. The former scenario will set a “soft precedent” for the SEC to bully other crypto exchanges in the country. David Kemmerer, co-founder and CEO of CoinLedger, stated that if BUSD is determined to be a security by the regulator, Binance will be subject to additional oversight and regulations over the stablecoin. Paxos disagreed with the SEC staff, saying that BUSD is not a security under federal securities laws. Richard Mico, US CEO and Chief Legal Officer of Banxa, said that the SEC’s action against BUSD could be an indirect move to penalize “offshore” crypto businesses such as Binance.
The implications of the SEC’s crackdown are far-reaching. If the SEC manages to kill BUSD, it could “embolden regulators to target other stablecoins in the future”, leading to a decline in liquidity and trading volumes across the cryptocurrency market. Mohammad Taher Khayami, COO of Dubai-based iTeller, also believes that users may become increasingly wary of using these tokens for fear that they could be shut down at any moment.
Despite the setback, many still believe Binance will bounce back from the latest setback as the crypto exchange has a strong track record of adapting to changes in the market. The latest blow may not turn out to be fatal, but it is still too early to tell. The regulatory landscape is still uncertain and it remains to be seen how the SEC will proceed with its case against BUSD.