SEC Scrutiny Against Paxos Led Massive Binance Withdrawals

• Over 388 BUSD has been burned in the last 24 hours.
• The stablecoin trading around the $0.99 price range.

Since the announcement of the US Securities and Exchange Commission (SEC) action against Paxos and its stablecoin Binance USD, the largest cryptocurrency exchange Binance has experienced a spike in withdrawals from its users. 

The stablecoin BUSD also known as Binance USD, was introduced in 2019 by Binance and Paxos. Then it has branded with Binance, the largest crypto exchange in the world by daily trading volume. According to the blockchain data tracker Peckshield, the BUSD token has seen massive redemptions. Overall 388 million BUSD were burnt in the last 24 hours.

Further, According to Nansen’s blockchain data, customers have withdrawn more digital assets in the last 24 hours than they have deposited ($2.8 billion versus $2 billion).

However, Binance’s CEO Changpeng Zhao ‘CZ’ stated in his Twitter post that they will continue to support BUSD for the foreseeable future. And he informed the crypto users that the “funds are SAFU and fully covered by reserves in their banks”.

Where it all Started?

Paxos is a leading blockchain and tokenization infrastructure provider. On February 3, 2023, SEC issued a Wells notice to Paxos stating, “BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws”. 

After that, the New York Department of Financial Services ordered the cryptocurrency firm Paxos to stop issuing the stablecoin. And SEC announced on February 13 that it planned to sue the company for violating investor protection laws. That led to a decline in the price of the crypto token. At the time of writing, Binance branded token traded at $0.999700, as per CoinGecko data. Meanwhile, the prominent stablecoin Tether (USDT) traded at about $1.00. 

Further, the crypto exchange Binance in-house coin BNB declined over 11% on Monday. At the time of writing, BNB traded at $292 with a market cap of $46 billion. Also, BNB price has decreased around 10% in the last 7 days. The crypto token has a 24-hour trading volume of $1.1 billion.