What will happen to Binance if the SEC manages to kill BUSD: Expert opinion

What will happen to Binance if the SEC manages to kill BUSD: Expert opinion

Since becoming embroiled in a regulatory dispute, BUSD's market cap has been on a steep downward spiral. Since reaching an all-time high of $23.04 billion in November 2022, the once-major stablecoin's market cap has fallen by more than 60% to $9.17 billion at the time of writing.

The situation on Paxos is indicative of the larger picture of crypto exchanges under attack by the United States Securities and Exchange Commission (SEC). There is uncertainty in the stablecoin industry. Despite the fact that Binance does not issue BUSD, the stablecoin is still crucial to its ecosystem.

Impact of the crackdown

Adam Cochran believes that the SEC is suggesting that Binance is an unregistered securities exchange, arguing that BUSD is an unregistered security “brutal 4D chess.” He continues speculated that Binance has two options – settle or be open to discovery by a US authority. The former scenario will set a “soft precedent” for the SEC to bully other crypto exchanges in the country.

“If they agreed, it would certainly block the Voyager deal and lead to a penalty and likely industry ban in the US for executives (is their market-making unit exempt too?), but would also set a 'soft precedent' to bully other US exchanges.”

On the other hand, the latter scenario could prove more damaging for Binance. When speaking withCryptoPotatoexplained David Kemmerer, co-founder and CEO of CoinLedger,

"If the regulator determines that BUSD is a security, Binance will be subject to additional oversight and regulations over the stablecoin. The crypto exchange would have to comply with strict SEC rules to issue BUSD on its platform."

Paxos categorically contradicted the SEC staff, saying that BUSD is not a security under federal securities laws. A similar opinion is shared by many industry experts that the BUSD issued by the company is not an “investment contract” under the Howey test as there is no expectation of any profit. But it's also important to highlight that the Securities Act of 1933 contains more than 30 features that define security.

While Paxos complied with NYDFS's order to stop minting new BUSD, Binance's boss CZ called The exchange will continue to support BUSD. Since the stablecoin is a core component of Binance's business, its actions are likely to impact Binance's overall results, Kemmerer added.

If the SEC succeeds in killing BUSD, the implications are many. For one thing, such a move could “encourage regulators to target other stablecoins in the future.” According to Mohammad Taher Khayami, COO of Dubai-based iTeller, there could be a significant decline in the stablecoin market as users become increasingly wary of using these tokens for fear that they could be shut down at any time. He added,

“This, in turn, could lead to a decline in liquidity and trading volume across the cryptocurrency market, which would be bad news for Binance and other exchanges that rely on stablecoins to facilitate trading.”

Will the blow be fatal for Binance?

Richard Mico, Banxa's US CEO and chief legal officer, said the SEC's action against BUSD could be an indirect move to punish "offshore" crypto companies like Binance, rather than the stablecoin project itself.

“The SEC continues to crack down on a number of different elements of the crypto industry, with many concerned that the regulator is regulating through enforcement rather than a clear regulatory framework.”

While the setback for BUSD will have a domino effect on Binance, many still believe it will recover from the recent setback as the crypto exchange has a strong track record of adapting to market changes. The final blow may not prove fatal.

.