Coinbase to Delist Binance USD Stablecoin Amid Regulatory Scrutiny
Cryptocurrency exchange Coinbase warned customers Monday the company will suspend trading for Binance USD in less than a month, two weeks after Paxos Trust disclosed it will stop minting the Binance-branded stablecoin, citing regulatory pressure.
Coinbase’s announcement follows a recent internal review, the San Fransisco-based exchange stated on Twitter, adding it will suspend BUSD trading on March 13.
“Our determination to suspend trading for BUSD is based on our own internal monitoring and review processes,” a Coinbase spokesperson told Decrypt. “When reviewing BUSD, we determined that it no longer met our listing standards and will be suspended.”
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
Earlier this month, Paxos said it would “end its relationship with Binance” ahead of a lawsuit from the Securities and Exchange Commission over issuing BUSD–which aims to track the price of the dollar through reserves of financial assets. The SEC plans to sue Paxos for violating investor protection laws, the company confirmed to Decrypt.
Coinbase’s decision to suspend trading for BUSD is likely an attempt to avoid scrutiny from regulators that might claim the exchange facilitated the sale of unregulated securities, Director of Regulatory Affairs at Blockchain Intelligence Group Timothy Cradle told Decrypt.
“They're probably coming to the same conclusion that I think most rational people would come to,” Cradle said. “This is going to end in a settlement, the cease-and-desist [order] is going to be somewhat permanent, and Paxos would have to register with the SEC to re-launch the coin.”
Cradle said exchanges took similar measures in 2020 after the SEC accused Ripple Labs of raising $1.3 billion in unregistered securities sales through the token XRP. Numerous exchanges, including Coinbase, suspended XRP in the wake of the lawsuit's announcement. The dispute between Ripple Labs and the SEC remains ongoing today.
Paxos Trust has owned and operated BUSD since its inception in 2019 when the blockchain infrastructure platform entered into a licensing agreement with Binance, the largest cryptocurrency exchange by volume. Coinbase began listing BUSD on its platform in April of last year.
Binance’s founder and CEO Changpeng Zhao has stated that Paxos was also ordered to stop issuing BUSD by one of its primary regulators, the New York Department of Financial Services (NYDFS), as well.
2/ We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS).
Paxos is regulated by NYDFS.
BUSD is a stablecoin wholly owned and managed by Paxos.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
Though Paxos oversees the backing of BUSD that’s issued on Ethereum, it does not do the same for the BUSD issued by Binance on the exchange’s proprietary network Binance Smart Chain.
To maintain the legitimacy of BUSD that flows on Binance’s network, the exchange claims it keeps the tokens fully collateralized with Paxos-regulated BUSD. The backing, however, has slipped beyond $1 billion on multiple occasions, Binance has admitted, saying it has encountered “delays” with gathering the appropriate capital.
Binance did not immediately respond to requests for comment from Decrypt.
BUSD is the third-largest stablecoin by market capitalization with a total value of around $10 billion, according to data from CoinGecko, only behind Tether’s USDT and Circle’s USDC stablecoins.