Photo by regularguy.eth on Unsplash
 

The SEC continues to apply pressure on digital asset and cryptocurrency operators. The most recent fines and complaints initiated are for unregistered securities offerings, specifically related to Staking. Thus far in 2023, Nexo agreed to pay $45million and cease the operation of their Ear Interest Product (EIP) and Kraken was hit with a $30 million fine for also failing to register the offer and sale of their cryptoasset staking as a service ($aaS) program. 

Many exchanges offer staking to allow their customers a seamless way to participate in improving a blockchain and in exchange for the client locking up their cryptocurrencies for a period of time the holder of the cryptocurrency is rewarded by the blockchain itself with additional cryptocurrency. This process is critical for the entire ecosystem to work for proof of stake blockchains. 

Coinbase (Ticker: COIN) has received many warnings from the SEC and in response, Coinbase has produced the following blog post to explain why the Coinbase Earn program is not a security. Take a look at the HOWEY test, which the SEC uses to determine whether an investment contract is a security, and decide for yourself. 

Paxos is the latest to receive a Wells Notice from the SEC on February 3rd, 2023 to stop mining Binance USD. SEC is alleging that their Binance USD (BUSD) token is a security and should be registered under US federal securities laws. 

Paxos issued this statement on Feb 13, 2023, in response to the SEC’s Wells Notice, “Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. Paxos has always prioritized the safety of its customers' assets. BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts. We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary”.
 

Market Commentary & Market Statistics

Binance Token is up 19% year-to-day, but trending 6.5% lower today on SEC Inquiry to Paxos.   

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Relative volume is 2.25 times 60 day average trading volume 

Since January 1, 2022, BNBUSD has had 20 occurrences where the price was down more than -6% in one trading day. On the following trading day, only 6 times occurred and the price continued to go lower the day after the event. 

Historical Volatility - remains elevated since FTX implosion on November 7th. 

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SEC has issued over $2.4 billion in fines on an industry that was formed after the great financial crisis to form a decentralized financial system. As growth in digital assets persists and more centralization occurs further scrutiny from regulators seems to be the continuing trend.

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