Circle Takes on Binance: Regulatory Complaint Filed Over Stablecoin Issuance
The implosion of FTX and Alameda – which has often been described as one of the largest institutional failures in modern American history – has begun a new wave of stablecoin regulatory scrutiny across the globe. Already, the United States SEC has charged Kraken crypto exchange with selling unregistered securities through its staking program. As a result, the proof-of-stake (PoS) secured blockchains like Ethereum are expected to experience a regulatory impasse.
Additionally, the New York Department of Financial Services (NYDFS) has directed Paxos, a leading tokenization infrastructure platform known for BUSD issuance, to cease the minting of new stablecoins. With the SEC charging Paxos for issuing unregistered securities, analysts forecast more troubles for the crypto market in the near future.
Circle on BUSD Stablecoin
According to a report by Bloomberg, Circle Internet Financial Ltd. issued a complaint to the New York State Department of Financial Services last year about rival crypto firm Binance’s mismanagement of reserves for its tokens.
According to persons familiar with the matter, Circle alerted the New York State Department of Financial Services on issues its team had surfaced in blockchain data that showed Binance did not store enough crypto in reserve to support tokens it had issued.
Notably, Binance issues crypto tokens on its blockchains including BNB Chain from other chains like Ethereum in the form of BEP20 or BEP2. Normally, the crypto tokens issued by Binance on behalf of other chains are supposed to be pegged in a ratio of 1:1. However, the exchange has previously admitted not holding enough reserves.
For instance, Binance at one point held only $100 million in stored collateral to support $1.7 billion in Binance-peg USDC.