This Monday (13), Paxos paused issuance of the stablecoin Binance USD (BUSD) following an order from US regulators. Days earlier, on Friday (10), one of its biggest rivals, USDCoin (USDC), burned $4.7 billion worth of tokens.
That is, someone saved $4.7 billion, equivalent to R$24.4 billion, in USDC days before the news was revealed to the public.
In its defense, rumors of investigations were already circulating on Thursday (9), noting that in addition to Paxos (issuer of BUSD), Circle (issuer of USDC) was also in the crosshairs of US regulators.
“Additional actions come from SEC”Andrew warned Thursday, 9, citing sources who report that “exchanges and stablecoin issuers will receive a warning from Wells in the coming days and weeks”.
“Circle and Paxos [foram] specifically mentioned.”
UPDATE: Additional SEC actions are coming.
**source: “Exchanges and issuers of stablecoins will receive Wells Notices in the coming days and weeks.”
**named Circle and Paxos in particular.
— Andrew (@AP_Abacus) February 9, 2023
Since Circle and Paxos work in a similar way, using the backing of their stablecoins to invest in other assets (such as US Treasuries), it is possible that the USDC will soon be notified as well. In its most recent report, Circle pointed to a millionaire profit on its investments.
The Coinbase Quick Trigger
Last Wednesday (8), Coinbase CEO Brian Armstrong claimed to be “Rumors are heard that the SEC is keen to get rid of cryptocurrency strikes”. As early as Thursday (9), his rival was fined R$158 million for not being allowed to offer such a service in the US.
On Friday (10), security firm PeckShield revealed that $4.7 million in USDC had been converted to dollars. On the date, the company even associated the bailout with the above strike case.
“In the past 24 hours, $4.7 billion USDC has been burned by Coinbase alone. Possibly because of the recent SEC ban [prática de] to expand?”
In the last 24 hours there is $4.7 billion #USDC burnt from @coinbase only. Possibly due to recent @SECGov strike-related deletion? https://t.co/fXfPS2UP49
— Peck Shield Inc. (@peckshield) February 10, 2023
However, with the revelations of regulatory pressure on its rival, Paxos, the reason may have been different. As it happens, someone relied heavily on their sources and withheld $4.7 billion in USDC before any official announcement from regulators regarding stablecoins.
Another detail is that Coinbase, the brokerage where these billions were burned, has a direct link to the development of the USDC.
Therefore, Armstrong’s brokerage appears to have good resources with the US government. After all, Coinbase appears to be ahead of both staking and stablecoins. Another hypothesis of his expectations can be translated into one word: coincidence, in case anyone wants to believe that.
US Pressure on Cryptocurrency Market
As Nic Carter warned last week, the US is trying to “quietly ban cryptocurrencies”. That’s why pressure on stablecoins comes on the long list of heavy-handed attacks by the US government, as well as the Federal Reserve’s Christopher Waller’s rules about cryptos going to zero.
For now, it remains to be seen whether regulators will act on Circle, as they did on Paxos.
Although insiders like Changpeng Zhao say so “the funds [da BUSD] are safe”, now it’s pay to see, literally. After all, those positioned in stablecoins depend on third parties to process their redemptions and, in the worst case scenario, the US government may interfere.
Finally, it’s time for attention. Another point to consider is the cryptocurrency market as a whole. After all, stablecoins account for the bulk of trading volume on exchanges, so regulatory pressure on them could cause both liquidity problems and price drops in the market.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
