The United States Securities and Exchange Commission (SEC) plans to sue Paxos for issuing and listing its Binance USD (BUSD) stablecoin, benefitting its top-rival, Tether (USDT), whose market capitalization has risen to multimonth highs.
BUSD market cap drops by $2 billion
The SEC claims that BUSD, a U.S. dollar-backed stablecoin, is a security, noting that Paxos has violated investor protection laws by white-labeling it.
Related: Paxos ‘categorically disagrees’ with the SEC that BUSD is a security
Since Feb. 13, when the news broke, the BUSD market cap has lost roughly $2 billion, down to around $14 billion as of Feb. 16 — the lowest since January 2022.
As Cointelegraph reported, Binance has seen its withdrawals and BUSD redemptions surge post-Paxos crackdown.
USD Coin market cap downtrend continues
At the same time, USD Coin (USDC), the second-largest stablecoin by market capitalization, has also witnessed capital outflows in reaction to the SEC crackdown news. Its supply decreased from $41.29 billion on Feb. 12 to as low as $40.99 billion on Feb. 14.
However, this figure rebounded to $41.30 billion on Feb. 15 after Circle clarified that it had not received any lawsuit threat from the SEC.
.@circle has not received a Wells notice. https://t.co/lE74zHVLka
— Dante Disparte (@ddisparte) February 14, 2023
Despite recent inflows, USDC’s market cap remains in a general downtrend since its June 2022 peak of $56 billion — a 25% decline over the past eight months.
Tether dominance jumps, market cap rises over $69 billion
The regulatory crackdown on U.S.-based stablecoin firms has been a boon for top stablecoin Tether, whose market cap has jumped over $69 billion.
69B
— Paolo Ardoino (@paoloardoino) February 14, 2023
Data shows that nearly $890 million of inflows since Feb. 12 has pushed Tether’s market dominance to 51.25% as of Feb. 15.
The jump likely suggests that investors were spooked by the crackdown on BUSD and sought safety in Tether USDT. Tether is owned by Hong Kong-based iFinex, which also owns the Bitfinex cryptocurrency exchange.
Related: USDT vs. USDC vs. BUSD: What are the similarities and differences?
Investigators have long attempted to uncover the accounting behind Tether to prove that its circulating USDT supply is not 100% backed by the dollar (and even a mix of other cryptocurrencies, treasury bills, money market funds and other assets) as it claims.
Tether has repeatedly denied the accusations and provides regular assurance opinions signed by third-party accounting companies every quarter.
The latest report from Dec. 31, 2022, states that consolidated assets amounted to at least $67 billion, exceeding consolidated liabilities by at least $960 million.
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