On the 27th of February, Coinbase exchange announced its plans to suspend Binance USD (BUSD) trading in March 2023. Binance stablecoin will be removed from Coinbase Pro, Coinbase Exchange and Coinbase prime on the 13th of next month. The renowned crypto platform informed users that the decision was due to its most recent review, as BUSD no longer meets its listing standards.
While Coinbase did not specifically mention its reasons for removing BUSD, the action isn’t astonishing to users. BUSD came under intense heat in February following secondary complications from its issuer. Paxos issued Binance USD, and the company regulated the token’s supply.
Can BUSD be Classified as a Security?
Some weeks back, Paxos came under scrutiny from the Securities and Exchange Commission. The SEC accused Paxos of illegally issuing a security in BUSD. With the pressure from the SEC and the order from the New York Department of Financial Services to halt the minting of BUSD, FUD spread amongst BUSD holders.
Although Paxos has coorperated with the NYDFS, the crypto company has vowed to stand up to the SEC’s accusations. In its defense, Paxos believes BUSD is not a security since it does not meet all criteria to be classified as one. In contrast, the SEC continues to disagree with Paxos, just like it has done with Ripple, Kraken, and a few other crypto companies in the past.
Following the trilemma, Changpeng Zhao, the CEO of the Binance exchange, assured users that funds were safe. CZ also noted that the Binance exchange would continue to support BUSD despite the hate it was getting from regulatory the US regulatory authorities. Notably, CZ admitted that the supply of BUSD would decline over time, and the exchange would consider using stablecoins not pegged to the US dollar soon.
Since the clamp down from the SEC, Binance USD has been on a steady decline. Currently, BUSD has a market capitalization of $10.7 billion and occupies the 8th position on the crypto market ranks. BUSD’s current market cap sharply contrasted its value just four months ago. In November last year, BUSD boasted a capitalization of over $23 billion, holding its ground as one of the largest stablecoins.
Interestingly, BUSD only lost its stability slightly amidst the fear and uncertainty. The stablecoin traded around $0.99 on the 13th of February. However, in no time, BUSD quickly regained its $1 peg. It is yet to be known if other crypto platforms will take steps to delist BUSD, just like Coinbase. Certainly, BUSD’s recent saga is nothing compared to the Terra & UST debacle that shook the crypto ecosystem around May last year.