Stable coins not to replace U. S. dollar-Matrixport
2023.02.14 03:18
Stable coins not to replace U. S. dollar-Matrixport
By Tiffany Smith
Budrigannews.com – The recent scrutiny of Paxos and its Binance USD (BUSD) token, according to Matrixport’s head of research, is not a direct attack on stablecoins themselves.
Markus Thielen of Matrixport made the argument in an analysis published on February 14 that the issuer of the Binance USD (BUSD), Paxos Trust Company, may not have exercised sufficient oversight over the token.
He went on to say that the problem itself “does not appear to be around stablecoins.”
Thielen argued that Paxos had breached its obligation to carry out tailored, periodic risk assessments and due diligence on Binance and Paxos-issued BUSD customers.
Paxos recently confirmed that on February 3, the United States Securities and Exchange Commission (SEC) sent a Wells notice to the stablecoin issuer over its alleged failure to register the offering under federal securities laws. The New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance.”
According to Thielen, BUSD has issued $11 billion on Ethereum, and a tokenized version of BUSD has also issued $4.8 billion on the Binance Smart Chain.
He stated, “It appears that NYDFS is now concerned that the $4.8 billion may not be adequately backed or have had issues with being 1:1 backed.”
However, Paxos stated on February 13 that “BUSD tokens issued by Paxos Trust have and always will be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.” This statement was made by Paxos.
“BUSD is a 1 to 1 backed stablecoin that is one of the most transparent stablecoins in existence,” Binance stated in a statement to Cointelegraph.
Thielen points out that the incident that occurred on January 24 when Binance mixed customer funds with collateral may have also sparked some of the regulatory actions.
Despite the recent actions taken against BUSD, some remain concerned about the future of other stablecoins.
Paxos recently stated that “there are unequivocally no other allegations against Paxos” in addition to the current problem with BUSD.
Dante Disparte, Chief Strategy Officer and Head of Global Policy at USD Coin (USDC) issuer Circle, informed:
“Circle maintains that USDC is a regulated dollar digital currency issued as stored value in accordance with U.S. money transmission law,” reads the statement.
Disparte went on to say that “the facts and circumstances in any type of regulatory action like this are all different, as are the structural and regulatory considerations with each of the cryptocurrencies that are in circulation around the world.”
However, Thielen has cautioned the market not to be overly concerned about BUSD’s future.
Binance has made a mistake here, but they are working on it and it should be fixed soon. So, should we really be concerned? What Thielen said
“Not in my opinion. Is the peg coming loose? NO. We are no longer in a bear market, where one is concerned with the downside; in bull markets, one is focused on the upside,” he added.
