Dispatch #127: Is the U.S. Going After Stablecoins?

Feb 18, 2023 3 min read

Dispatch

In this patch of your weekly Dispatch:

Paxos gets probed
The Maskverse on Fox
Bitcoin’s best day since Sept

The Big Idea

Paxos Under Fire for BUSD

Everyone expected the US regulatory response to ratchet up in the wake of FTX, and so far, that has certainly come to pass. The latest target was Paxos, who are in regulatory hot water due to their issuance of BUSD in coordination with Binance.

Over the weekend, the Wall Street Journal reported that the SEC was planning on suing Paxos around BUSD for “issuing unregulated securities.” Paxos later issued a statement saying they would defend themselves vigorously in court if it did so.

An even more dramatic announcement came Monday morning when Paxos announced that, due to scrutiny from the New York Department of Financial Services, the company would stop issuing BUSD. The latter is the third largest stablecoin, so the implications for the industry are big.

And indeed, the implications are what’s on everyone’s mind. Is this an issue contained to Paxos and Binance, or is the SEC starting a full-on action on stablecoins?

The Latest In…

Mainstreaming and NFTs

Hey, hey, here’s a category we haven’t been able to use lately! The extremely popular US TV singing competition “The Masked Singer” has launched an NFT-laden digital fan experience.

Fox partnered with several firms to build what they’re calling “The Maskverse” featuring token-gated content, NFTs that come with access to multimedia content, and more.

Fox is also still on track to launch an NFT-driven TV series involving the creator of “Rick and Morty” later this year. An even higher conviction about the long-term role NFTs have to play in mainstream entertainment.

The Latest In…

Bitcoin Prices

A week that started out with some major regulatory intrigue and proceeded into a slightly hotter-than-expected inflation print in the U.S. wouldn’t necessarily be your pick for a major 10%+ daily move in the price of BTC, and yet, here we are.

Bitcoin absolutely ripped up on Wednesday, surging more than 11% to over $24,000 – its most significant daily percentage increase since last September.

The community had many different explanations for the move.

Some thought it was increased demand and excitement thanks to Ordinals. Some pegged the factors as more macro. Others pointed to a short squeeze with $60M in BTC short positions liquidated. Whatever it is, we’re not complaining but we’re stacking.

The Week’s Most Interesting Data Story

From Regulated to Unregulated Stables

Advocates of sensible regulatory regimes often point out that the U.S. taking a turn for the draconian wouldn’t kill crypto – it would just push it offshore.

That game theory has been playing out precisely in the stablecoin markets. Over the last few weeks as scrutiny around U.S.-regulated stablecoins has increased, there has been a rotation out of stables including Paxos’ BUSD and Circle’s USDC, and into the offshore USDT.

Tether’s market cap is currently at its highest level since last June.