Yahoo Finance’s Jennifer Schonberger joins the Live show to discuss news that the New York State Department of Financial Services has ordered crypto firm Paxos to halt the creation of new BUSD tokens.
BRIAN SOZZI: Always lots going on in the crypto space with regulators continuing to laser focus on the sector. Some notable news out of Binance this morning. Let's get to Yahoo Finance's Jen Schonberger. Jen.
JENNIFER SCHONBERGER: Brian, crypto firm Paxos has been ordered by the New York Department of Financial Services to halt creating new units of Binance's stablecoin, just as Paxos is reportedly facing a lawsuit from the Securities and Exchange Commission over Binance's coin.
"The Wall Street Journal" reported on Sunday that the SEC told Paxos that it plans to sue the company for violating investor protection laws. The notice reportedly alleges Binance USD, a digital asset that Paxos issues and lists, is an unregistered security.
Paxos and Binance entered into a partnership to launch Binance's stablecoin, known as BUSD in 2019. The stablecoin is wholly owned and managed by Paxos, which has assured that all funds are safe and fully covered by reserves in their banks. Paxos will continue to service the product and manage redemptions.
Paxos saying in a statement to Yahoo Finance, "BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024. New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar," a regulated US dollar-backed stablecoin that's also issued by Paxos.
Now, Binance for its part saying in a statement to Yahoo Finance, quote, "Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm." Now, the SEC does not comment on possible investigations. We do know that the commission is scheduled to hold a closed-door meeting this Thursday on enforcement action where it very well could take action against Paxos.
The SEC has been on a blitz this year when it comes to enforcement actions against crypto firms, having brought four already. We know that Chair Gensler is expected to be hauled up to Capitol Hill to testify before House Republicans on the SEC's actions in the crypto sphere. And so Chair Gensler likely to point to many of these enforcement actions.
Now, we will have so much more on crypto, the outlook for crypto, the regulation landscape, and so much more in an 11 o'clock show with a crypto special. Brian.
JULIE HYMAN: Yeah, Jen, I'll take it. Can you just talk just a little bit more about the implications of this or the context for this? Like, what it means that they're doing this. What it means for people who are on the Binance platform. Are there concerns more broadly about not just these stablecoins, but about Binance more broadly as well?
JENNIFER SCHONBERGER: Well, I mean in this case, it appears that Paxos and Binance are assuring customers that if you do hold this stablecoin, that you will be able to redeem it one-for-one. And if you look at the action today, the trading action, it's not really sinking so much in value. So this is more just about shrinking market cap is what we'll really see at this point. Investors probably not gonna be harmed as much.
On the Securities and Exchange side, they are viewing this as a violation of securities laws. So that's kind of a whole different camp right there where the SEC is trying to use its authority that it already has to enforce the law to protect investors.