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NYDFS Instructs Paxos to Stop Issuing BUSD, Coinbase Shares Concerns about SEC’s Interest

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According to reports, Coinbase said in its official tweet that this week the New York State Department of Financial Services (NYDFS) asked Paxos to stop issuin…

NYDFS Instructs Paxos to Stop Issuing BUSD, Coinbase Shares Concerns about SEC’s Interest

According to reports, Coinbase said in its official tweet that this week the New York State Department of Financial Services (NYDFS) asked Paxos to stop issuing the stable currency BUSD denominated in US dollars. Coinbase did not know what aspects of BUSD the United States Securities and Exchange Commission (SEC) might be interested in, but the stable currency was not a security.

Coinbase: stable currency is not a security

Interpretation of the news:


Coinbase, one of the biggest cryptocurrency exchanges in the United States, shared its concerns after the New York State Department of Financial Services (NYDFS) reportedly instructed Paxos to stop issuing BUSD, a stable currency denominated in US dollars. According to Coinbase’s official tweet, the exchange was not aware of the aspects of BUSD that the United States Securities and Exchange Commission (SEC) might be interested in, but it stated that the stable currency was not a security.

While the exact reasons behind NYDFS’s instruction remain unknown, one plausible explanation is related to the regulatory scrutiny surrounding stable coins. Stable coins, as the name suggests, aim to maintain a stable value. The most popular stable coin is Tether (USDT), which is pegged to the US dollar. However, stable coins are often associated with concerns over transparency, liquidity, and custody. These concerns have raised questions about whether stable coins should be classified as securities.

The SEC has been actively investigating the matter and has issued several warnings to cryptocurrency projects developing stable coins. For instance, in November 2018, the SEC settled charges against two companies, Airfox and Paragon, for unregistered initial coin offerings (ICOs) of tokens that were deemed securities. The SEC also issued a statement in April 2019 saying that stable coins with the characteristics of securities could trigger regulatory requirements.

Coinbase’s reaction to NYDFS’s instruction indicated that the SEC’s scrutiny could be a worrying sign for stable coins. Nevertheless, Coinbase maintained that BUSD was not a security, stating that it was backed by the US dollar and was subject to the oversight of NYDFS. BUSD is issued by Paxos, a regulated trust company, and can be traded on the Paxos platform and several other exchanges, including Binance.

In conclusion, NYDFS’s instruction to Paxos to stop issuing BUSD underscores the regulatory scrutiny surrounding stable coins. The SEC’s interest in stable coins could lead to increased regulatory requirements for stable coin projects. While Coinbase expressed its concerns, it also highlighted the importance of transparency, credibility, and compliance for stable coin issuers. The future of stable coins remains uncertain, but their potential to mitigate the volatility of cryptocurrencies and provide a reliable store of value suggest that they could play a more significant role in the cryptocurrency ecosystem.

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