The U.S. Securities
and Exchange Commission (SEC) may ban crypto staking for retail investors, according
to rumours heard by Coinbase
co-founder and CEO Brian Armstrong. He also said that such a ban would be
ineffective and trigger companies to move offshore where there are minimum
regulations. This move would lower investor protection, something that came to
light with the infamous FTX crypto exchange. Armstrong said it is better to
establish proper regulations in the market and this should be discussed with
the participants.
More troubling news has
recently surfaced about a lawsuit from the U.S. Securities and Exchange
Commission (SEC) to Paxos Trust, the issuer of Binance stablecoin, for violating investor protection laws. The underlying reason for the
lawsuit is quite strange as SEC accused Paxos of issuing unregistered security.
In order to define an asset as a security the Howey Test is applied with
criteria of profit expectations. However, Paxos categorically disagrees with
the SEC staff because BUSD is not a security under federal securities laws. The
BUSD is pegged to the U.S. Dollar as one to one, and there are serious doubts as
to whether anyone expects to gain any profits by just owning such an asset. So,
the SEC investigation is seen unjustified and unfair with unfounded
accusations.
This regulatory raid
by the SEC promoted rumours that this was a response to Binance CEO Changpeng
“CZ” Zhao role in investigating the FTX crypto exchange fraud. However, Paxon
is one of Binance’s partners and the
exchange has 20% of its reserves in BUSD. Considering all the facts, a more
viable reason for the lawsuit is that the SEC is willing to establish strict
regulations to the sector to prevent another FTX case from happening. Binance
plans to continue supporting its Binance USD despite its issuer, Paxos, being
ordered to stop minting the stablecoin by the U.S. SEC and New York regulators.
Binance may alter its operation rules in case of serious capital outflows to
other stablecoins, including a possible disabling of BUSD as an exchange
underlying stablecoin. The New York Department of Financial Services (NYDFS)
has ordered Paxos to cease issuing dollar-pegged BUSD. This will eventually
lower BUSD market cap.
The overall market
situation is still in favour of risky assets. The recent rally in the markets
was inspired by rising balance sheets of central banks. City Group has
estimated that the actions of the Bank of Japan to control the debt yield curve
and efforts of the European Central Bank to lower reverse repo operations added
$1 trillion to the global balance sheet over the last four months. However, the
pressure on risky assets will soon be restored as central banks continue their
monetary tightening actions. The Federal Reserve is trying to secure a soft
landing for the American economy while cautiously hiking interest rates. So,
any break in this cycle may be seen as logical as interest rates seem to be
quite appropriate for the moment. Any quantitative easing could be discussed
only if the economy signals to serious troubles that are not visible right now
despite some tensions. With this in mind, BTS has high chances of dropping to
$17,000 in the short-term perspective.