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We’ll examine news about Binance and whether it’s still trustworthy, including a dip in its stablecoin, BUSD. We’ll review a tweet from Cz, the head of Binance, and discuss the importance of using cold storage solutions to keep crypto funds safe. We’ll also provide insights on the lawsuit between the US SEC and Paxos.
So today there’s actually some regulatory troubles with Binance. This is one of those things we never really thought we’d be saying, because Binance has always been seen as one of those super safe, super trusted exchanges. But today we’re gonna be covering a little bit of news that’s happened about Binance, about B U S D specifically as well.
And just to keep you guys in the loop, you know, whether you should still be trusting them or whether there’s more at play. So B U S D, which is bin’s stablecoin recently, deep pegged slightly. I mean, I don’t Know if you can call it a deep pegging. I mean, technically yes, it deep pegged.
However, nothing like the whole U s T situation. B U S D is currently at 99.96 cents, so very close to the dollar packing. It hasn’t really lost any value, to be honest, but of course, whenever a, stable coin goes away from its $1 enumeration. People get a little bit stressed and that’s understandable, especially after the whole lunar situation and what happened there.
So what can we expect and why is this happening? Well, this, I think it’s best to, first of all go over to Twitter and show you C Z’s Tweet. Now, for those of you that don’t know or might be new to crypto, c z. He is the head of Binance and a lot of people kind of hail him as the almighty crypto God , right?
Lots of people see him as that guy who just knows everything in crypto because he owns the largest exchange. And I think a lot of people, you know, really do hold him to this high pedestal. So they kind of take his word as gospel. Now, of course when this came out by Binance, everyone was very scared.
Everyone was thinking what’s happening? cause a lot of people hold their funds in Binance and if you guys didn’t know, you know, by quite a large margin, it is the largest spot exchange. You know, it does six to seven times the volume of Coin base, uh, most days. So, you know, there’s a lot of funds there and a lot of people, I’m sure are holding their funds on there and not in a cold storage.
And guys just. This kind of thing happens. It’s just very important to note. You know, cold storage is so important to make sure if you’re holding for the long term, which we always recommend people do, is you’ve gotta be using a, ledger or a treasure or something to keep those funds safe. If you keep it on exchange, you know, no matter how safe the exchange is, in theory, there’s always a chance you might lose your funds.
So just be careful and don’t take that kind of risk with money you can’t afford to lose. So anyway, his thread here, uh, essentially I won’t go through every single little bit. In summary, B U S D is issued and redeemed by Paxos and funds are safe. So they were informed by paxos that they had been directed to cease minting new B U S D by the New York Department of Financial Services, the N Y D F S.
Now, paxos is actually regulated by N Y D F S. and B U S D is a stable point, wholly owned and managed by Pack Source. So you can kind of see how there might be a little bit of conflict here when the N Y D F S come in and say, Hey, uh, you know, we want you to stop doing this. So as a result, the B U S D market cap.
Will only decrease over time. Paxos will continue to service the product and manage redemptions. Paxos also assured us that the funds are safe and fully covered by reserves in their banks with the reserves audited many times by various audit firms already. So again, it’s very good to hear this cuz this was not what we were hearing from, uh, the qua back with the whole U s T situation.
None of these things were being said, and are definitely not believed, at least. So then on the alleged s e C versus Paxos lawsuit, I have no information about it other than the public news articles. The lawsuit is between the US S E C and Paxos. I’m not an expert on US laws, but personally I agree with Miles Logic.
Essentially, if you take a look here, it says, in doing so, the Supreme Court established four criteria to determine whether an investment contract exists. An investment contract is an investment of money in a common enterprise with the expectation of profit to be derived from the efforts of others. So the s e c has labeled B U S D as an unregistered, security as they seem to be labeling everything nowadays as a underage to security, obviously we’ve just had the case, with the, the recently settled library case.
Obviously, the XRP case has been going on and on and on for ages. But how on earth is a stable coin considered security when it’s clearly doesn’t meet the how we test criteria. So I think this is very, very much true, right? You know, no one puts money into a stable coin thinking, I’m gonna make money out this.
It’s not a profitable investment, it’s somewhere you should just hold your funds on the sidelines before you go into a coin. So I have no idea personally how that would align if we are going off these four rules here. Let me know what you think in the comments down below. Do you agree? Do you disagree?
So if B U S D is ruled as a security by the courts it, it will have profound impacts on how the crypto industry will develop or not develop in the jurisdictions where it’s ruled. As such, Binance will continue to support B U S D for this foreseeable future and we do foresee users migrating to other stable coins over time and we will make product adjustments accordingly.
EG. Move away from using B U S D as the main pair for trading, et cetera. So, you know, whilst he says that they’re safe, it’s okay. , you know, he’s obviously saying they’re going to be pulling back from the B U S D, which is quite a big thing to say. You know, that’s obviously gonna have an effect on people using it, and I’m sure we will be seeing a lot of volume flowing out of uh, B U S D very soon.
Will this have an effect on Binance coin itself or the exchange users? I don’t know, but I do think this is quite scary seeing the s e c just. Constantly coming at it again and again. They just, they can’t get a win out of anything at the moment. So they’re just trying to go for anything they can. And, uh, you know, it’s, it’s not great.
It’s really kind of bottlenecking the whole crypto space. Something that I’m not a fan of. Now another thing we’ve got is from watcher.guru, we have Justin Circle. U S D C filed regulatory complaint alleging that Binance mismanaged reserves in 2022. So it feels like now they’re down, people are piling on. Do you guys believe this, do you think it’s true?
I don’t know personally, I am more inclined to believe Binance as they have been good players, throughout. Rather than bad actors where we’ve seen FTX and U S T, etc. However, you know, this crypto space has shown that anything can happen. So, I don’t know. You know, full transparency, but not associated with Binance or anything in any way.
Those are just my honest opinions. And in the past we can see here, you know, last. Month we saw Binance admiss to problems with the B U S D peg. So again, further problems arising. And just a quick thing to cap this off guys, let’s quickly have an understanding of how the B U S D and Binance PEG works.
So for the transparency, it’s a stable coin peg to the US dollar and issued by Paxos, the people that are being regulated by the N Y D F S. So the asset is always available for purchase and redemption. At the rate of one B S D is $1. B U S D is designed with three key areas in mind, high quality reserves, audits, and regulation.
Well designed stable coins should only be backed by cash and short term US treasuries with a maturity of fewer than 90 days. So they post these monthly reserve reports and monthly holding reports, which again is, is great to see. This is not something we saw with other stable coins in the space. And then you’ve got more on how it works in different.
How is it fully back, et cetera. And I definitely urge you guys to go and read this blog on binance and yeah, I hope you kind of got a little bit of more info, insight about this. You know, a lot of people were very, very scared, not knowing what’s going on with their potentially their funds, if you have all your funds, it, B U S D, for example.
So I hope this clarifies the situation a little bit better in terms of what’s gonna be going forward. I, you know, there’s still. Unsaid here from cz and the rest of Binance. I think, like you said, they’re probably gonna be pulling away from B U S D, so if I was you, obviously this is not financial advice.
Please do your own research, do your own due diligence. But if I was in this position and my money was in B U S D, I’d probably like to diversify a little bit into other stable coins just to ensure that if anything did happen, I was covered. Because we don’t want another U S T situation to happen and people to lose their entire funds and savings.
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