• The US SEC issued a Wells Notice to Paxos concerning the issuance of Binance USD (BUSD) stablecoin.
• Following this, net outflows from Binance have reached $788 million in the past 24 hours.
• Over 342 million BUSD tokens have been burned in the past 24 hours as investors rush to withdraw their funds from Binance.
SEC Alleges Paxos for Issuing Unregistered Security
The US Securities and Exchange Commission (SEC) has issued a Wells Notice to Paxos Trust Company over allegations that it violated investor protection laws by issuing an unregistered security; the Binance USD (BUSD) stablecoin. The New York Department of Financial Services (NYDFS) subsequently ordered Paxos to halt the issuance of BUSD.
Increased Outflows From Binance Exchange
Data obtained from blockchain intelligence platform Nansen indicates that net outflows from the exchange had hit $788 million in the past 24 hours, marking this as the largest outflow since December 17th when Mazars auditor pulled down its proof of reserves audit from its website. Despite these large withdrawals, Binance has reassured users that their funds are safe and that it can handle any amount of withdrawals.
Increased Redemptions of BUSD Tokens
Investors seem to be cashing out of the BUSD stablecoin as fears grow about potential legal action by SEC against Ripple’s XRP token gain traction. Data from Peckshield shows that over 342 million BUSD tokens have been burned in the past 24 hours indicating increased redemptions of this token.
Risk Of Legal Action Against XRP Grows
The SEC’s charges against Paxos and its subsequent order for them to halt issuing new tokens could lead to further legal action against Ripple’s XRP token which is currently facing numerous charges by multiple parties including FINRA and Coinbase alleging violation of securities law.
The recent developments surrounding both Paxos‘ issuance of unregistered security and Ripple’s XRP token suggest that crypto assets may need more regulatory oversight if they are going to be considered legitimate forms of investment assets in mainstream markets.
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