BUSD post-mortem

Dark skies for stablecoins

Welcome back. January was a rosy month for crypto, and the way things are going February could be an even greater treat. With its price tentatively floating around $25k, Bitcoin might just be stealing Rihanna’s title of best comeback of 2023.

Today: The SEC doubles down on stablecoins, Blur steps in the ring with OpenSea, and good news from Mt. Gox. Let’s go.

—Angelina

Bye Bye Baby BUSD

What absolutely dominated the crypto news cycle these last two weeks? The SEC. After cracking down on crypto exchange Kraken, regulators are now turning their attention to BUSD—and it’s scary stuff.

The SEC intends to sue stablecoin issuer Paxos for selling BUSD as an unregistered security, according to the WSJ. Just hours after the news broke, Paxos announced it will stop minting BUSD entirely.

But wait— isn’t BUSD Binance’s stablecoin? Well, kind of:

  • BUSD is the third largest stablecoin in DeFi, right after Tether’s USDT and Circle’s USDC. While it’s branded by Binance, BUSD is issued by Paxos as a white label product. As such, Paxos fully owns and manages BUSD.

The SEC’s crackdown on BUSD raises two major questions:

1) What about Binance? Despite Binance’s efforts to distance itself from BUSD, the crypto exchange saw a massive outflow of customer funds following the news. Understanding why requires some reading between the lines—by targeting BUSD, the SEC might be trying to send Binance a message (not of the friendly kind).

2) Where does this leave stablecoins? There’s something off about the SEC declaring BUSD a security. Broadly speaking, securities are defined as an investment contract from which investors expect profit. But stablecoins are specifically designed not to make a profit…they’re stable (ideally). If the SEC classifies all stablecoins as securities, crypto faces some serious regulatory issues.

Big picture: Regulation is not inherently bad. But the SEC’s aggressive approach isn’t protecting investors (as is the Commission’s job). Instead, it’s driving stablecoins offshore, where investors aren’t protected by U.S. law.

Already, investors are flocking from BUSD to offshore-based Tether—the issuer of crypto’s largest stablecoin, USDT, with a controversial past.

Should OpenSea Be Worried?

Everyone loves a good underdog story.

Enter: Blur, the new kid on the NFT block that’s threatening to push OpenSea off its throne.

What’s the buzz about? Blur’s rapid ascent culminated last week, as the new NFT marketplace overtook OpenSea in daily Ethereum trading volume. The surge followed the heavily anticipated airdrop of Blur’s governance token BLUR the day before. But Blur’s popularity isn’t just the result of temporary airdrop-frenzy…

Why Blur is different:

  • It’s fast. Faster batch minting and real-time listings make Blur speedier than most of its competitors.

  • Slick UX. Blur places analytics, sales history, and more on a single page—meanwhile, OpenSea requires traders to open several tabs.

  • Expansive choice. Blur aggregates listings from all major NFT marketplaces.

Moving forward: Blur could pose a real threat to OpenSea. It already seized its window of opportunity to reheat the controversial NFT royalty discussion by recommending creators block their listings on OpenSea. Blur committed to helping NFT creators earn full royalties on their collections, while OpenSea (and many other major NFT marketplaces) allow traders to set royalties to optional—at the expense of creators.

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Mt.Gox’s Largest Creditors Quench BTC Fears

Since the storied crypto exchange Mt. Gox got hacked nine years ago, creditors have yet to see their money back. But now there’s light at the end of the tunnel—and it’s good news for bitcoin.

The two largest Mt. Gox creditors, which together represent one-fifth of all Mt. Gox claims, chose to get their bankruptcy recovery paid out mostly in bitcoin.

Great for BTC: Had the creditors preferred their payouts in fiat, the trustee overseeing the bankruptcy estate would likely have been forced to sell off recovered Mt.Gox funds. The news quenches fears that such liquidations could swamp spot markets with north of 120,000 BTC.

Meanwhile, BTC’s price jumped to $25,000 shortly after the news broke. Coincidence?

In other news:

  • A new lawsuit against Terraform Labs proves that Do Kwon purposefully mislead Terra investors and Jump Crypto is tied up in the mess.

  • The SEC will make it harder for hedge funds to work with crypto firms.

  • SBF’s $250 million bond is so lenient some consider it a "joke".

  • NFTs are supposed to protect artists from IP theft—the very thing Yuga Labs is accused of doing.

  • Tornado Cash developer Alexey Pertsev has to remain in jail, Dutch judges ruled.

Crypto Job Board

And that’s what you need on your radar today in crypto. Are OpenSea’s days counted? Shoot me a reply with your thoughts. See you back here next week!