Coinbase delisted Binance USD (BUSD), CEO Armstrong blames liquidity issues

Updated: 02 March 2023

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Coinbase recently decided to delist Binance USD (BUSD), a popular stablecoin that was issued by Paxos, but had Binance’s branding. As the exchange made the decision to delist it, its CEO, Brian Armstrong, came out to explain the situation. According to him, BUSD trading has been suspended because Coinbase had concerns regarding the asset’s liquidity.

Before Armstrong’s explanation, Coinbase said that the reason for the delisting was based on the exchange’s internal monitoring and review of the stablecoin. The exchange hinted that BUSD no longer meets its standards, and as such, it cannot stay on the list. However, the exchange did not explain what was the issue.

Coinbase worries about BUSD liquidity now that Paxos stopped minting

Armstrong himself appeared on Bloomberg TV on Wednesday morning, and he explained the move and the decision to unlist the asset. He said that “The reason we did that was that Paxos, the issuer of BUSD, had been ordered to stop minting it, so we were concerned about liquidity issues for our customers.”

Paxos stopped minting new BUSD recently after the New York Department of Financial Services (NYDFS) ordered it. The order, on the other hand, came because the US Securities and Exchange Commission (SEC) announced that it considered BUSD to be an unregistered security. As a result, it also decided to sue Paxos for issuing the asset.

While the stablecoin does carry Binance’s name, the asset is not actually Binance’s. The world’s leading exchange gave its permission to Paxos to use its branding, and the asset is listed on Binance. However, Paxos is the company that issued the coin, the one who is minting it, managing it, and more.

With the SEC lawsuit against $LUNA and Do Kwon now public, $LUNC (which has no owner or CEO) and $USTC have a huge opportunity. I wouldn't be surprised to see #Binance take a closer look at $USTC due to the #BUSD situation with Paxos as an alternative. pic.twitter.com/HUomNP4Sh8

— Tishette08 (@KarimB14240104) February 26, 2023

The US SEC crypto crackdown

Since BUSD was targeted by the US regulators, the crypto community started dumping the asset massively, and switching to other stablecoins. Tether collected a sizable portion of the market along the way. Meanwhile, the rest of the crypto community is now speculating what might happen next.

Some believe that crypto users would switch to other centralized stablecoins, while some believe that this might lead to the rise of algorithmic stablecoins.

As for Paxos, recent reports have revealed that the company has entered “constructive discussions with the SEC. At the same time, it also ended its relationship with Binance.

🚨The CEO of Paxos says they are in “constructive discussions with the SEC”. Paxos also announced they are ending their relationship with Binance.

— Satoshi Stacker (@StackerSatoshi) February 21, 2023

The US regulators’ crackdown on Paxos and BUSD is only one example of the much more widespread campaign that the regulators — led by the SEC — have started in 2023. The US securities watchdog also said that staking is now considered unregistered security; it charged Do Kwon and Terraform Labs with fraud, and it did the same with multiple close associates of Sam Bankman-Fried. Even celebrities are being targeted, with the most recent example being the former NBA star Paul Pierce, who was fined $1.4 million for crypto endorsement.

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