Leading US crypto exchange, Coinbase Global announced on Twitter on February 27 that the company will suspend trading of Binance’s native stablecoin, BUSD. Coinbase cited “listing standards” as the reason for delisting the third-largest stablecoin by market capitalization.
“Our determination to suspend trading for BUSD is based on our own internal monitoring and review processes. When reviewing BUSD, we determined that it no longer met our listing standards and will be suspended.”
The firm noted that Binance USD (BUSD) trading will be halted on March 13, 2023, at approximately 12:00 p.m. EST.
We regularly monitor the assets on our exchange to ensure they meet our listing standards. Based on our most recent reviews, Coinbase will suspend trading for Binance USD (BUSD) on March 13, 2023, on or around 12pm ET.
— Coinbase Assets (@CoinbaseAssets) February 27, 2023
According to Coinbase, the suspension will affect Coinbase.com (simple and advanced), Coinbase Pro, Coinbase Prime, and Coinbase Exchange. However, the exchange clarified that users will be able to access and withdraw their BUSD funds at any time after Mar. 13.
Binance’s exchange token, Binance coin (BNB), fell 1.8% following the news. At the time of writing, it is trading at $301.86.
Failure Of BUSD
Binance and BUSD are having a hard time due to the increased scrutiny of the US Securities and Exchange Commission (SEC) on New York-based BUSD issuer, Paxos Trust. The SEC issued a letter to Paxos, known as a Wells Notice, around February 12, alleging that it violated the securities and investor protection laws. The notice stressed that the company’s Binance USD is an unregistered security. However, the Paxos disagreed with the SEC’s claim, saying that the stablecoin was not a security.
Newsflash: SEC issues Wells Notice to Paxos informing Paxos of possible enforcement action. In my 18 years at SEC enforcement division, I can’t recall a time when I sent a Wells Notice and an enforcement action did not follow. SEC’s crypto-sweep continues! https://t.co/kItzSEcCUF
— John Reed Stark (@JohnReedStark) February 13, 2023
A “Wells Notice” is a communication the SEC gives to companies or individuals when the company plans to file a lawsuit against them.
In addition, the Paxos’ issue was not limited to the SEC’s decision. On February 13, the New York State Department of Financial Services (NYDFS) ordered Paxos to cease issuing new Binance USD, resulting in a $2.7 billion drop in market capitalization within days.
In a letter, the authority said the order was issued due to several ongoing issues related to the monitoring of Paxos’ relationship with Binance. Meanwhile, the NYDFS’s notice did not explain what these issues were.
In response to the order, Paxos said it will stop BUSD minting from February 21 and will continue to support existing BUSD payments until February 2024.
Paxos has since terminated its relationship with Binance, citing turbulent industry situations as the reason.
It would “end its relationship with Binance for the branded stablecoin BUSD.”
Coinbase posted on Twitter on February 15, mentioning the BUSD saga.
“We don’t know what aspects of BUSD might be of interest to the SEC. What we do know: stablecoins are not securities.”
This week the NYDFS ordered US-based Paxos to stop issuing US dollar-denominated stablecoin BUSD and the SEC issued a Wells notice to Paxos. We don’t know what aspects of BUSD might be of interest to the SEC.
What we do know: stablecoins are not securities 🧵
— Coinbase (@coinbase) February 15, 2023
Charles Cascarilla, CEO of Paxos, said on February 18 that the company was in “constructive discussions” with the SEC about the matter. He also said that Paxos will defend BUSD’s position through litigation that BUSD was not a security.