FTX investors' multibillion-dollar losses have damaged the regulator's image. To justify poor oversight of the industry, the SEC is starting 2023 off with a crackdown. Key areas for tightening are PoS coins and stablecoins, with BUSD from Binance being in the middle of both.

PoS coins offer passive income opportunities, enabling them to be treated as securities. In such a case, the crypto exchange must have an appropriate licence, and stricter requirements are imposed on traders.

In making its claims against aggregators, the SEC ignores legal loopholes and the lack of a mechanism for registering staking services. A pre-trial settlement was reached with Kraken last week, in which the company was fined $30 million and had its access to passive income closed. Because the cryptocurrency's share of Ethereum staking is 9%, the altcoin has lost 3.6% against Bitcoin over the past four days.

Binance offers investors an opportunity to make passive income by staking BUSD, which is issued by Paxos Trust Company. Paxos was one of the first to obtain a BitLicense and is regulated by the NYDFS. In addition to BUSD, Paxos has also launched the USDP stablecoin and PAXG gold-linked token.

Yesterday, the WSJ published an article on the SEC's plans to sue Paxos for issuing BUSD as an unregistered security. In addition to pressure from the SEC, the NYDFS also initiated its investigation into Paxos.

Claims against Paxos cover more than just staking. Earlier this year, Bloomberg published an article on the security gap in BUSD's duplicate. The stablecoin from Paxos is an ERC-20 token. Binance is issuing its own BUSD in the form of a BEP-20 coin to expand its range of services. B-token supply has reportedly exceeded collateral by more than $1 billion in some periods.

The presence of systemic risk poses a threat to both issuers. Cryptocurrency exchange representatives acknowledged a management error after a while.

It's quite possible that as part of a pre-trial settlement, Paxos will terminate its business relationship with Binance and stop supporting BUSD. If that happens, the crypto exchange would remain the only guarantor of the stablecoin, which isn't good for its popularity. 

StormGain Analytics Team 
(a cryptocurrency trading, exchange and storage platform)