After a flurry of assertive regulatory steps from U.S. officials over the past several days, the markets for digital currencies are tense.
According to data from CoinDesk, Bitcoin was marginally higher at $21,826.68 at approximately 05:31a.m. ET.
Investors are evaluating a number of significant regulatory initiatives in the US as officials try to control the once-wild cryptocurrency market.
Paxos was instructed to stop creating new Binance USD (or BUSD) stablecoins on Monday by the New York State Department of Financial Services. Stablecoins are a subset of cryptocurrencies that are linked to tangible assets. BUSD and the USD are directly correlated. The third-largest dollar-pegged cryptocurrency, BUSD, is produced by Paxos.
Bonds and cash are common examples of the reserve assets used to back stablecoins in the real world. As a trader does not need to convert money back to fiat currencies, they are utilised to trade in and out of various cryptocurrencies.
Following the directives of the New York regulator, BUSD remained comparatively stable and close to its $1 peg. According to Paxos, BUSD will be redeemable at least through February 2024. People can exchange BUSD for Pax Dollar, Paxos’ own stablecoin, or they can redeem money in US dollars (USDP).
Paxos acknowledged receiving notification from the Securities and Exchange Commission that the agency may suggest legal action claiming that BUSD is a security and that Paxos should have registered the token offering with the SEC in accordance with federal securities legislation.
The market is anticipating the SEC’s accusations against Paxos to determine whether they will have any bearing on other stablecoins like USD Coin (USDC) and tether (USDT). Paxos is not currently the subject of any SEC enforcement action.
The SEC and cryptocurrency exchange Kraken reached a settlement last week on claims that Kraken traded unregistered securities.
Following a year of volatility that saw roughly $1.4 trillion taken off the market, along with bankruptcies, failures of projects and firms, and the collapse of major exchange FTX, U.S. regulatory action has increased in some areas of the cryptocurrency industry.
After the massive sell-off last year, according to Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, there might not be a significant decline in coin prices.
Since the majority of the market’s selling may have taken place over the previous year, the market appears to be handling the news very well, according to Ayyar, who spoke to CNBC on Tuesday.
Investors are anticipating the next regulatory development.
“We’re seeing a lot of scrutiny across various sectors in crypto in the U.S., with the two most recent areas being staking and stablecoins. This is an obvious repercussion of the fallout from FTX, Luna, and the general contagion in crypto over the last year,”Ayyar
“The markets might take some time to consolidate here and wait and watch whether there are further events that play out in terms of regulatory crackdown, hence we could see a couple of weeks of sideways action.”