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Paxos Trust lawyer and chief compliance officer Dan Burstein claims that Tether's USDT and Circle's USDC are unregulated "stablecoins" in name only. Paxo-issued Paxos Standard (PAX) and Binance Dollar (BUSD) are approved and regulated by the New York State Department of Financial Services (NYDFS). That means each token is backed by reserves in the safest instruments, such as bank deposits insured by the US Federal Deposit Insurance Corporation or short-term maturity US Treasuries. Gemini Dollars (GUSD) issued by Gemini Trust Company, are similarly NYDFS regulated.

Terra's U.S. dollar-pegged stablecoin UST is now the #4 stablecoin on the market (about $9 billion) but it's very different from the three that sit above it. Tether's USDT ($77 billion), USD Coin's USDC ($42 billion) and Binance's BUSD ($15 billion) are run and managed by centralized entities, and the assets that back them (reportedly 1:1) are also centralized. However, UST is a decentralized stablecoin backed by other cryptocurrencies. Terra itself is a layer 1 smart contract-enabled network built using the Cosmos software developer kit, and UST is minted by users by "burning" (destroying) LUNA, Terra's native token responsible for paying transaction fees and participating in governance. DAI, the #5 stablecoin (just under $9 billion), is also cryptocurrency backed.

In June 2022, the New York Department of Financial Services (NYDFS) issued formal guidance for NYDFS-approved stablecoin issuers, including upgrades to the amount and quality of information that issuers must provide to the public. With the new guidance, management's assertions must now be tested and published no later than 30 days after the end of the month, but also on one randomly selected business day during the month. Secondly, stablecoin issuers will be required to submit their internal controls to audit. However, the new regulations apply to Gemini dollar (GUSD) Binance USD (BUSD) and Paxos dollar (USDP).

The U.S. Securities and Exchange Commission (SEC) filed suit against Binance, its U.S. platform and CEO Changpeng Zhao (CZ) in the District Court for the District of Columbia. There were 13 charges, including unregistered offers and sales of the BNB and BUSD tokens, the Simple Earn and BNB Vault products and its staking program. In addition, the SEC alleges in the suit that Binance failed to register its Binance.com platform as an exchange or a broker-dealer clearing agency. CZ was sued as a "controlling person." https://www.sec.gov/news/press-release/2023-101

Binance will cut Bitcoin (BTC) trading fees to zero worldwide as of 8 July 2022, to coincide with the exchange's five-year anniversary. It will remain in place until further notice. Zero-fee trading will cover the following 13 spot trading pairs: BTC/AUD, BTC/BIDR, BTC/BRL, BTC/BUSD, BTC/EUR, BTC/GBP, BTC/RUB, BTC/TRY, BTC/TUSD, BTC/UAH, BTC/USDC, BTC/USDP and BTC/USDT.

Cryptocurrency investors and traders have been cashing out of the stablecoin Tether (USDT) in the wake of the TerraUSD (UST) debacle. There has also been a flight to large centralized US-domiciled stablecoins like Binance USD (BUSD) and USD Coin (USDC), with monthly attestations and 100% treasury bill backing, and a flight away from Tether (USDT) with less-frequent attestations and riskier backing, and DAI and other decentralized stablecoins.

It's clear regulators prefer interacting with banks because banks are centralized and easy to control. Reading between the lines, the real risk stablecoins pose is creating a system less amenable to government efforts of control. But technological progress is not going to stop. Economic activity is simply going to move elsewhere in the world if we continue down this path. United States regulators believe they face a choice between allowing or banning stablecoins, but in reality they face a choice between allowing stablecoins onshore or having them be primarily offshore. Already, the biggest winner of the current U.S. attack on crypto is likely Tether, the largest stablecoin issuer with a less-than-reputable past. Stablecoin tether (USDT) is growing again while Circle's USDC and the Paxos-issued BUSD, both of which are more transparent, more regulated and safer for consumers, are shrinking.

The New York Department of Financial Services (NYDFS) is reportedly investigating stablecoin issuer Paxos. The full scope of the investigation is unclear. Paxos' stablecoins include the Pax dollar (USDP) and Binance USD (BUSD). Paxos has been in the news recently over rumors the U.S. Office of the Comptroller of the Currency - a federal bank regulator - may ask it to withdraw its application for a full banking charter. Paxos has denied these rumors. Paxos also holds a virtual currency license (BitLicenses) issued by NYDFS.

Tether's USDT opened the year at a market cap of $66.2 billion, but has grown 22% to $81 billion. Circle's USDC has moved the opposite way, losing 21% of its market cap. USDT's share of the stablecoin space is up to 61.5%, its highest mark in two years. The collapse of TerraUSD in May 2022 and shutdown of BinanceUSD (BUSD) in February have increased concentration in the stablecoin market. USDC is struggling amid regulatory concerns in the United States and fallout from banking chaos, when Circle revealed it had 8.25% of its USDC reserves in Silicon Valley Bank. Meanwhile, concerns persist exist around USDT over its underlying reserves.

Binance will list a tokenized version of Coinbase's stock once to let users buy and sell fractions of a share. Earlier in the week it launched a tokenized version of Tesla stock.

"Binance's move to automatically convert USDC and two other stablecoins may lead to more USDC flowing into the exchange, according to the CEO of Circle, which issues the coin. "Binance is trying to consolidate dollar liquidity w cash equivalent stables. That's good for liquidity and market depth," said Circle CEO Jeremy Allaire on Twitter."

Binance will stop supporting trading in spot pairs that include these stablecoins, but will allow users to withdraw funds in the form of these stablecoins. In other words, the trading of these stablecoins will no longer be supported, but Binance users will be able to withdraw amounts denominated in these stablecoins.

"Binance will no longer support competing stablecoins, including USDC, on its exchange. USDC's market cap is down 5% since the announcement."

"In addition to a difference in asset quality, I'd argue that USD Coin and Binance USD have better legal protections for users in the event of failure. Binance USD in particular operates under the New York stablecoin regulatory framework, which obliges Binance USD's issuer, Paxos, to operate as a trust. Trusts are effective mechanisms for ring-fencing customer funds from an issuer's other creditors."

"The crypto ecosystem relies on stablecoins as a cheap and plentiful form of dollar liquidity. If all stablecoins were classed as securities, dollar liquidity for onshore crypto exchanges and platforms would dry up as stablecoin issuers either went offshore or out of business. It is very hard to see what would replace it, at least in the short term: U.S. dollars (and other fiat currencies) are not liquid on crypto exchanges, because to move them around requires banks, and non-USD stablecoins have gained little traction thus far. So trading crypto onshore would become much more expensive and considerably riskier. The dollar liquidity drought could also severely impact DeFi, because that relies on stablecoins (or derivatives of stablecoins) as collateral. So the SEC's action could bring down the onshore crypto ecosystem. "

"There are long-running boring debates about whether certain sorts of cryptocurrencies are "securities" subject to the SEC's jurisdiction. The SEC tends to think that almost everything in crypto is a security; most crypto companies think that almost nothing is a security. (Very few crypto companies register their token or product offerings with the SEC, and the SEC sometimes sues them for doing unregistered securities offerings.) The general rule - called the "Howey test" - is that a security is "the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." A lot of crypto projects look a lot like that, but you can debate the specifics."