BUSD stablecoin recorded some setbacks after the US SEC’s recent enforcement action on its issuer, Paxos. Aside from a plunge in trading volume, BUSD’s market capitalization has also plummeted significantly.
Recent data shows that BUSD’s market capitalization has met a steep downturn, going from its $23.49 billion all-time high on November 15, 2022, to below $10 billion. However, the stablecoin has maintained its position as the third-largest stablecoin by market cap even with Binance’s recent ordeal.
Binance USD Takes A Hit From Regulatory Crackdown
The market cap started declining on February 13 after Paxos announced a date to quit issuing the stablecoin. And by March 3, 2023, the stablecoin’s market cap had fallen to $9.67 billion.
BUSD market cap dropped -$2.45B (from 16.1B to 13.7B as of now), and most of it has moved to USDT.
USDT marketcap + 2.37B (From 67.8B to 70.1B)
USDC also declined -739M (from 42.3B to 41.5B)
Landscape is shifting.
(Note: BUSD is NOT issued by Binance.) pic.twitter.com/kVrZUYjuOh
— CZ
Binance (@cz_binance) February 17, 2023
Recall Binance has been under US regulators’ investigation radar for potential regulatory non-compliance, violation of investor protection law, and anti-money laundering rules violation.
In a recent interview, Binance’s chief strategy officer, Patrick Hillmann, told reporters that the crypto exchange is working with regulatory authorities to resolve these issues. Hillmann also noted that recent investigations would likely cause Binance to pay huge fines without mentioning a specific number.
Sequel to these issues, Paxos received a notice of an impending lawsuit from the SEC regarding its Binance USD stablecoins. This warning reportedly links to Binance’s ordeal with the regulators. Shortly after, Paxos received an order from the New York Department of Financial Services to stop minting and issuing the stablecoin in February.
Paxos, an NYDFS-regulated firm, had no option but to surrender, releasing a statement about the stablecoin’s minting fate on February 13.
The stablecoin recorded overwhelming investor runs as people rushed to withdraw their holdings, fearing what may happen next. This issue caused BUSD’s price to plummet, and its market capitalization fell from its November 2022 all-time high to $9.68 billion at press time. Since the crackdown, the stablecoin has shed over $6 billion from its market capitalization.
Top Crypto Exchanges Taking Actions Against BUSD
Due to the recent issues around BUSD’s minting, several top crypto exchanges might delist the stablecoin from their platforms. For instance, Coinbase, one of the largest cryptocurrency exchanges, announced that it would remove BUSD from its platform on March 13.
The crypto exchange cited the recent issues around the stablecoin’s minting and issuance as its reason for making the decision. In an interview, a Coinbase spokesperson told reporters that the exchange is removing BUSD because it no longer meets their listing standards.
After the issue with BUSD’s minting and issuance, Binance CEO Chanpeng Zhao (CZ) tweeted that he never took the stablecoin project in high regard. The Binance chief said he didn’t expect the stablecoin to last this long as he thought the project would fail in its first rollout.
Meanwhile, BUSD isn’t the only digital asset witnessing a decline. The broader crypto market also saw a drop in market capitalization as investor sentiments dwindled amid high asset volatility. Some observers are pointing fingers at the latest issues surrounding the crypto-friendly bank, Silvergate.
Reports stated that Silvergate delayed filing its 10-k annual report that details the company’s financial standing for the 2022 fiscal year. As a result, Silvergate’s stock price plummeted by over 50%.
Featured image from Pixabay and chart from Tradingview.com