Binance CEO Changpeng Zhao said that the regulatory pressures would lead to a broader adoption of stablecoins not pegged to the US dollar.
Instead of US dollar-based stablecoins, the crypto industry will switch to other options such as Singapore-dollar based stablecoin or yen stablecoins, CZ said in a statement.
Gold is a reasonable alternative, however, CZ believes that the US dollar still holds a dominant position in international fiat markets.
This explains why the US dollar-backed stablecoins make up the majority of the stablecoin volume. Their role is yet important because most people have faith in dollar fiat.
SEC is Breaking The Bond
But people’s interest in US dollar stablecoins began to flag following the US regulators’ recent actions.
On Feb. 13, the US Securities and Exchange Commission (SEC) announced it brought a case against Paxos Trust, the issuer of Binance USD BUSD, alleging the coin was an unregistered security, according to the Wall Street Journal.
A similar case happened in 2021 when Circle, the issuer of USDC, received an investigative order from the agency. According to filings sent to Circle, the SEC requested documentation and information related to certain holdings, customer programs, and the company’s operations.
Regulatory uncertainty could steer away the crowd, pushing them to seek other alternatives. CZ believes that other currencies like the euro, yen, and Singapore dollar-backed will emerge under governmental pressures in the US.
“I think given the current pressure and current stances taken by the regulators on the US Dollar based stablecoins, I think that as you said the industry will probably move away to non-US dollar based stablecoins[…]as a result of this we probably will see more euro based or other Japanese yen, Singapore dollar based stablecoins, so it’s actually prompted us to look for more options in different places.”
Algorithmic stablecoins are also an important part of the future crypto ecosystem, according to CZ.
The CEO of Binance, however, warned that they remain riskier compared to fiat-backed stablecoins. In May, the algorithmic stablecoin TerraUSD (UST) lost its link to the US dollar. This caused investors to lose more than $20 billion.
Not An Easy Sell
The risks of algorithmic stablecoins should be made clear while reverses for fiat-backed stablecoins also require transparency. So, users can see exactly what’s going on and make their own decisions about which stablecoins they wish to store or utilize as a result of this functionality.
A stablecoin is a digital currency that is tied to a fiat currency such as the US dollar or the Euro at a 1:1 ratio. Tether (USDT), USD Coin (USDC), and Binance USD are the three most popular stablecoins (BUSD).
These currencies have become the crypto economy’s backbone, allowing consumers to trade and acquire various cryptocurrencies without having to convert their coins into fiat.
However, Binance USD has now become the SEC’s target. According to the SEC, a stablecoin backed by the US dollar is an unregistered security under US law.
According to data from blockchain data startup Nansen, consumers withdrew almost $2.8 billion in digital assets from Binance in the last 24 hours.
Binance has thus had a net withdrawal of around $830 million in the last 24 hours. This is also the most significant net withdrawal since November 2022.
After the recent crackdown on the stablecoin Binance USD (BUSD), which has been created by Binance in cooperation with Paxos since 2019, investors are continuing to show signs of concern.
The most recent actions taken by the SEC provide evidence that the agency has concerns regarding goods related to both cryptocurrencies and stablecoins.
In addition, the SEC competed against high-interest account providers such as BlockFi and Celsius. The agency claims that it is selling securities that have not been registered with the appropriate authorities.
Additionally, in the past, the Chairman of the SEC, Gary Gensler, has hypothesized that stablecoins may possibly qualify as securities.