As investors processed the implications of an aggressive American regulatory stance on Tuesday, the United States intensifying attempts to rein in the cryptocurrency industry put a cap on the value of digital assets. The BUSD token plunged after Paxos announced that it would no longer mint new BUSD tokens despite the top 100 tokens registering a slight gain.
An index of the top 100 tokens saw a gain of almost one percent as of one o’clock in the afternoon in Tokyo, partly bouncing back from a decline that occurred a day earlier and was spurred by an order from a New York agency to stop the issue of Binance-branded stablecoin BUSD. At the same time, fears of additional regulatory scrutiny impacted wider cryptocurrency markets, which led to the largest losses among major cryptocurrencies.
BUSD token drops amid Paxos’ retraction from minting the token due to SEC scrutiny
The value of Binance’s BNB token dropped by more than 7% and was trading very close to its lowest level in one month according to Bloomberg. Paxos, a United States company that generates tokens for Binance, the world’s biggest cryptocurrency exchange, is the subject of intense regulatory examination, according to media sources. As a result, the token’s value has decreased by more than 10% in trade over the last week as Paxos announced it would no longer be minting BUSD.
Paxos might face possible regulatory action as a result of its making of the Binance USD (BUSD) stablecoin, which the Securities and Exchange Commission (SEC) has deemed to be unregistered securities. This warning was issued by the SEC earlier this week. This decision was made not long after Paxos received instructions from the New York Department of Financial Services to cease the production of BUSD tokens.
After the shift, the on-chain statistics shown by Binance revealed that there was a large increase in the number of withdrawals and BUSD redemptions. Binance faces a big challenge in obtaining a market share in the extremely profitable stablecoin field as a result of the regulatory action taken against it. However, this news comes at a time when Binance is under investigation by the United States Department of Justice for possible breaches of sanctions and money laundering laws, as well as increasing regulatory scrutiny on the exchange’s banking partners in the United States.
SEC going in hard on crypto: Binance halts USD deposits as U.S SEC cracks on staking
Due to recent security concerns, Binance has temporarily disabled dollar deposits and withdrawals for all of its foreign clients. The SEC was conducting investigations into crypto-staking services in addition to the action that was taken against Binance. Fears that other large companies, namely Coinbase Global Inc (NASDAQ:COIN) and Binance U.S., may be targeted next surfaced after the commission struck a settlement with Kraken to end the staking function offered by the exchange.
Bitcoin fell by 0.4 percent on Tuesday and is now trading at its lowest levels in the last three weeks as investors fret about the possibility of more regulatory action. Ethereum had a decrease of 1.1% and was trading at levels not seen since the beginning of January.
Cryptocurrency markets were muted throughout the day owing, in part, to an abundance of caution in front of significant U.S. inflation data that was coming later in the day.
