Coinbase Suspends Trading of Binance USD Amid SEC Pressure and Delisting Concerns

Crypto exchange Coinbase has announced that it will halt its trading of Binance USD (BUSD) in March, following the US Securities and Exchange Commission’s (SEC) stance against the stablecoin.  

Coinbase will cease to provide Binance USD trading beginning March 13th. As the crypto exchange stated on February 17th, 2023, the platform already does not support any trading pairs with BUSD. In certain jurisdictions, however, there is only one supported pair — BUSD/USD.

Nevertheless, the USD pair is not available in other jurisdictions, including New York and Germany.

According to CoinGecko’s data, Coinbase accounts for 0.01% of all BUSD/USD trading. BUSD and Bitcoin (BTC), the most popular trading pair with the stablecoin, are only accessible on specific trading platforms, including Binance, which is where the token originates.

The move follows the SEC issuing a Wells notice. Prior to this, the watchdog took legal action against Paxos on the basis that BUSD was, in fact, security. This led Paxos to delist the stablecoin. 

The SEC is applying increasing pressure on Coinbase, yet suspending trading of BUSD presents an excellent opportunity for the exchange to take a step that will be appreciated by regulators and only has minimal negative consequences due to stablecoin’s low trading volumes.

Timothy Cradle, director of regulatory affairs at Blockchain Intelligence Group, noted that Coinbase is responding to the potential SEC ruling for BUSD to be deemed a security. According to him, other US marketplaces are likely to do the same thing soon, similar to Ripple’s delisting a couple of years back.

Since 2020, Ripple has been embroiled in a legal conflict with the SEC over its token status. A summary judgment is likely to be settled before the end of 2023; however, nearly all trading platforms available in the US have already eliminated XRP, Ripple’s token, from their offerings.

According to Cradle, Coinbase’s move to abandon the BUSD is a proactive action in terms of regulation.

He pointed out that the challenge for Coinbase is that if the SEC determines BUSD to be a security, then Coinbase could face liability for selling unregistered security once the case with Paxos is settled. It is clear that Coinbase does not want to be considered an unregistered securities exchange.

Coinbase unveiled their stablecoin USDC with Circle in partnership back in 2018, and it has quickly become the world’s second most sought-after stablecoin, right behind Tether (USDT).

Since its release, there have been no known public SEC investigations into USDC’s token classification, and both Coinbase and Circle assert that they haven’t received a Wells notice regarding the digital asset.