This week, stablecoins have received much attention, with Binance USD (BUSD) and USD Coin (USDC) at the center of negative regulatory-related headlines.
First, a New York regulator ordered BUSD issuer Paxos to stop minting new Binance-branded stablecoin tokens. Then it was revealed that USDC was also under investigation by the US Securities and Change Fee (SEC), the same regulator that was suing Paxos for “unregistered securities” – the claim being that BUSD is security.
Tether (USDT) is the largest stablecoin by market cap and did not perform poorly.
Nonetheless, the uncertainty temporarily hampered the crypto markets, but Bitcoin unexpectedly surged to a six-month high on Thursday as bulls broke above $25,000. The transfer defied bearish sentiment and resulted in over $230 million in shorts liquidations, with merchants betting on costs falling amid the regulatory cloud surrounding stablecoins.
Regulation is required for stablecoins.
Many market observers believe the SEC’s action against BUSD or Paxos is arbitrary. In contrast, others believe another crackdown is unavoidable as regulators tighten their approach in the aftermath of the 2022 crypto shock waves.
According to Jeremy Kronick and Mark Zelmer in a new analysis report, stablecoins as a trade require “a comprehensive regulatory framework.” While regulators don’t need to reinvent the wheel, the researchers write in a C.D Howe Institute report published on February 16 that regulation is what stablecoins require to reach their full potential.
