Prompted by an intensifying regulatory crackdown in America, investors worldwide sold $6 billion U.S. worth of a %Binance branded %Stablecoin during the month of February.
Working in concert with the U.S. Securities and Exchange Commission (SEC), New York’s financial regulator halted new issuance of Binance’s stablecoin, called %BUSD in February.
The New York regulator said that unresolved issues related to Binance’s relationship with %Paxos, the company responsible for minting the U.S. dollar-pegged BUSD token led to the halt in new issuance.
The crackdown on BUSD led investors to sell the stablecoin en masse throughout February, causing the amount of BUSD in circulation to fall by more than a third, according to data from blockchain analytics firm Nansen.
A stablecoin is a cryptocurrency that is pegged to the value of another asset, typically the U.S. dollar or the price of gold bullion.
The SEC has targeted stablecoins in a coordinated crackdown since the start of the year, labeling them “unregulated securities” and halting companies from issuing the crypto tokens.
Analysts said the massive dumping of BUSD portends bad things for Binance, which remains the world’s largest %Cryptocurrency exchange.
Cracking down on stablecoins could also negatively impact the entire crypto sector as stablecoins play a critical role in cryptocurrency trading, allowing investors to switch between digital tokens without withdrawing their cash.
Binance chief executive officer (CEO) Changpeng Zhao has downplayed the regulatory crackdown, saying in media interviews that BUSD was never “big business” for the exchange.
Zhao has said that the majority of Binance’s revenues come from trading fees.
However, the BUSD stablecoin represented as much as 40% of the trading volume on Binance’s exchange last December, according to data from %CryptoCompare.
The massive sale of BUSD by investors comes at a time when Binance is facing scrutiny from U.S. regulators as part of a wider crackdown on digital assets.
The SEC recently blocked Binance from paying $1 billion U.S. to acquire the assets of bankrupt cryptocurrency lender %VoyagerDigital, saying that the proposed deal violated American securities laws.