Cryptocurrency investors have reportedly withdrawn about $6 billion from Binance USD (BUSD) coin, a stablecoin issued by Paxos Trust Company and supported by Binance, following regulatory scrutiny by the U.S. Securities and Exchange Commission (SEC) and the New York Department of Financial Services (NYDFS) into the activities of the company.
The SEC had informed Paxos that the stablecoin should have been registered as a security before it was sold to the American public as such it was considering taking action against the company.
On the other hand, the NYDFS ordered the company to cease producing the token due to violations of its obligations for risk assessments and due diligence checks.
According to data seen by Investors King on CoinGecko, the BUSD market value declined from $16.1 billion recorded on February 13, 2023 to $10.5 billion as of March 1, 2023.
Even though Binance CEO Changpeng Zhao acknowledged that the regulatory actions would impact the market capitalisation of the stablecoin, he insisted that the company is viable and will withstand any regulatory scrutiny as it is expected following what happened with Luna, FTX and others.
However, the series of uncertainty surrounding the entire cryptocurrency space has compelled many investors to state moving their investments to other risky assets, especially after the International Monetary Fund (IMF) released a nine-point plan that nations adopting cryptocurrency must consider before approving any crypto project.
SEC Chair Gary Gensler has previously voiced concerns that some stablecoins could be classified as securities. As regulatory scrutiny on stablecoins heightens, industry players need to ensure that their products adhere to the necessary regulatory requirements to avoid potential legal action and outflows.