The recent regulatory action against Paxos and Binance over the partnership's dollar-pegged stablecoin has spooked investors.
Following the crackdown from the SEC and the New York Department of Financial Services yesterday, Binance's native token BNB fell more than 5%, before recovering some early this morning.
Traders also pulled funds en masse from the crypto exchange. Data aggregated by Nansen indicates that in the last 24 hours, a net $356 million has fled the exchange amid the latest regulatory scrutiny. That figure nearly quadruples in the weekly time frame.
BNB is an exchange token that lets holders enjoy reduced trading fees and perks for exchange users.
The exchange token is trading at $291.47, per CoingGecko, having fallen from roughly $301 yesterday. BNB has faced a tough week overall and has dropped a whopping 10% over the past seven days.
In terms of overnight liquidations, leveraged BNB traders were blown out to the tune of $2.09 million, according to Coinglass.
BNB is still one of the top-five largest cryptocurrencies by market capitalization, boasting more than $45 billion in total value.
Binance's stablecoin woes
Yesterday, Paxos confirmed with Decrypt that the SEC plans to sue the crypto firm for violating investor protection laws. The SEC also alleges that the Binance USD (BUSD) stablecoin is an unregistered security.
Binance CEO Changpeng "CZ" Zhao took to Twitter to say that if the stablecoin is deemed a security, "it will have profound impacts on how the crypto industry will develop."
6/ "IF" BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such.
Amid the Commission's reported action, the New York Department of Financial Services (NYDFS) also directed Paxos to halt the issuance of additional BUSD. In a statement, Paxos said that it "categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws."
Launched in 2019, reserve assets backing the Binance-branded stablecoin are custodied by Paxos and are primarily held in U.S. treasury debt and bills, per the firm's third-party audit in December.
The halt comes into effect on February 21, but the firm said that "BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024."
Yesterday's move is only the latest in what appears to be a ramping up from regulators in the United States.
Last week, the SEC issued crypto exchange Kraken a $30 million fine for failing to register its staking service. The exchange has shuttered that service to U.S. citizens as a result.
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