Crypto Markets On Edge As Regulatory Crackdown In The US Intensifies

The last few days have seen US authorities take aggressive regulatory actions against the digital currency markets, which have put them on edge.

According to CoinDesk data, there was a slight rise in the price of Bitcoin, as it was trading at a value of $21,826.68.

Regulatory actions

The United States has taken a number of regulatory actions recently, which investors are still digesting. The authorities are trying to control the crypto industry that had been free-wheeling up till now.

The New York State Department of Financial Services issued an order to Paxos on Monday to prohibit it from minting new BUSD stablecoins.

The Binance USD stablecoin belongs to the Binance crypto exchange, which is the largest exchange in the market in terms of the trading volume.

A stablecoin refers to a digital currency, which is pegged to an asset in the real world, which is the US dollar in this case.

Paxos is the issuer of the BUSD stablecoin, which is the third-largest one that exists in the market. Cash and bonds are other real-world reserve assets that are used for backing stablecoins.

The reaction

Despite the orders of the New York regulator, the price of the BUSD stablecoin remained mostly stable and it was close to its $1 peg.

According to Paxos, they would continue redeeming BUSD until February next year. This means that people would be able to convert their stablecoins in US dollars, or could convert them into Paxos’ own stablecoin named Pax Dollar (USDP).

Paxos also revealed that it had been notified by the Securities and Exchange Commission (SEC) that BUSD could be declared as a security.

This would mean that Paxos should have registered it before offering it to the public. Since it did not do so, it would be in violation of federal securities law.

The expectations

The SEC has not yet taken any official action due to which the markets are unaware of what charges may be filed against Paxos.

This is because it is possible the charges could have implications for the other stablecoins in the market, such as tether (USDT) and USD Coin (USDC).

The previous week had seen the SEC and the Kraken crypto exchange come to a settlement, as the latter had also been accused of selling unregistered securities.

The regulatory action against the crypto industry in the US is focused on some of its aspects after the market had a chaotic year that saw almost $1.4 trillion of its value wiped out.

This was due to a number of companies and projects failing, numerous bankruptcies, and the year ending with the downfall of the FTX crypto exchange.

Crypto exchange Luno’s vice president, Vijay Ayyar stated that after the sharp sell-off seen in the crypto market last year, the crypto prices this year might not fall as sharply.

He said on Tuesday that the market had not reacted adversely to the news and remained cautiously optimistic. Investors are now waiting for more updates on the regulatory front.

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