Paxos

Enterprises should seek partners and solutions during the crypto winter: Paxos report

“We need more transparency over the reserves of these stablecoins, which I think we’re going to see,” Clara Medalie said.

Blockchain infrastructure provider Paxos has recently published a report, that aims at helping the community look beyond the crypto winter and understand how to respond to the current market conditions. 

Inside the 20 pages of the Paxos Crypto Winter Report 2023, the infrastructure provider identified several key opportunities for projects during the crypto winter. This includes seeking solutions and finding potential partnerships for their projects.

Within the report, Clara Medalie, the director of research at the digital asset data provider Kaiko, said that solutions like stablecoins remain one of the crypto use cases that have “consistently proven itself over time.” Medalie said that stablecoins have been very useful for the entire industry.

Total value settled with stablecoins by year. Source: Paxos Report

Despite being one of the use cases that proved itself, stablecoins still have room for improvement. “We need more transparency over the reserves of these stablecoins, which I think we’re going to see,” Medalie added. 

Apart from solutions like stablecoins, the report also highlighted that those who view the crypto winter as a “season for bridge-building” will come out ahead of the others. According to the report, it’s important to partner with those who are building businesses that implement technologies that aim to meet the “real-world needs of the financial sector.”

Related: Paxos set to withdraw from Canada amid regulatory uncertainty

Meanwhile, the United States regulating stablecoins may be a necessary step to keep the dollar strong according to Denelle Dixon, the CEO and executive director of the Stellar Development Foundation. Dixon recently said that if they want a strong dollar globally, a USD stablecoin is the “way to see that happen.”

On the other hand, the Bank of International Settlements (BIS) recently said in a working paper that stablecoins are a less preferable form of tokenized money. The report likened stablecoins to bearer instruments which were prevalent during the era of “free banking” in the United States.

Magazine: Get your money back: The weird world of crypto litigation

Enterprises should seek partners and solutions during crypto winter: Paxos report

“We need more transparency over the reserves of these stablecoins, which I think we’re going to see,” Clara Medalie said.

Blockchain infrastructure provider Paxos has recently published a report, that aims at helping the community look beyond the crypto winter and understand how to respond to the current market conditions. 

Inside the 20 pages of the “Paxos Crypto Winter Report 2023,” the company identifies several key opportunities for projects during the crypto winter, including seeking solutions and finding potential partnerships for their projects.

In the report, Clara Medalie, director of research at digital asset data provider Kaiko, says that stablecoins represent a crypto use case that has “consistently proven itself over time.” Medalie says that stablecoins have been very useful for the entire industry.

Total value settled with stablecoins by year. Source: Paxos

Regardless, stablecoins still have room for improvement. “We need more transparency over the reserves of these stablecoins, which I think we’re going to see,” Medalie adds.

Apart from solutions like stablecoins, the report also highlighted that those who view the crypto winter as a “season for bridge-building” will come out ahead of the others. According to the report, it’s important to partner with those who are building businesses that implement technologies that aim to meet the “real-world needs of the financial sector.”

Related: Paxos set to withdraw from Canada amid regulatory uncertainty

Meanwhile, the United States regulating stablecoins may be a necessary step to keep the dollar strong, according to Denelle Dixon, the CEO and executive director of the Stellar Development Foundation, who said that dollar stablecoins are the “way to see that happen.”

On the other hand, the Bank of International Settlements recently said in a working paper that stablecoins are a less preferable form of tokenized money. The report likens stablecoins to bearer instruments, which were prevalent during the era of “free banking” in the United States.

Magazine: Get your money back: The weird world of crypto litigation

Paxos set to withdraw from Canada amid regulatory uncertainty

Paxos assured its customers that their funds would “remain safely” in their accounts but advised users to withdraw all balances at their earliest convenience.

Paxos, a fintech company that offers blockchain-based solutions for the global financial industry, has announced its decision to withdraw from the Canadian market. 

The company released a statement informing customers that they will no longer be able to transact from their Paxos accounts starting from June 2, except for withdrawing their funds. The move comes as Paxos continues to assess “its readiness to re-enter the Canadian market in cooperation with the Ontario Securities Commission (OSC) at a future date.”

The announcement also stated that customers’ funds would “remain safely” in their accounts and will be reflected on their account balance, protected by Paxos’ terms and conditions. However, the company has urged customers to withdraw all balances from their accounts at their “earliest convenience.” Customers who don’t have any funds in their accounts will have their accounts automatically closed on May 9.

On the other hand, customers who maintain a balance in their Paxos account will still be able to access and withdraw their funds after June 2. However, they will not have full access to Paxos’ platform to initiate new trades. Paxos has advised customers to wire their fiat balances to bank accounts linked to their “itBit account” that is under their name or transfer digital assets held in their accounts to external wallets.

Related: New Canadian rules for crypto trading platforms leave little room for stablecoins

Paxos’ decision to exit the Canadian market comes at a time when Canada has been tightening its regulations on cryptocurrency platforms in recent months. On Feb. 22, the Canadian Securities Administrators (CSA) released a notice that mandates crypto exchanges to enter into new legally binding agreements as they wait for registration with the regulatory body. The updated undertaking includes a clause that forbids buying or depositing Value Referenced Crypto Assets, or stablecoins, via crypto contracts without written authorization from the CSA.

Paxos is not the only company to exit the Canadian market in recent months. On March 20, OKX informed Canadian users via email that because of “new regulations,” the cryptocurrency exchange “will no longer provide services or allow users to open new accounts in Canada starting on Mar. 24, 2023, 12:00 AM EST.”

On April 7, cryptocurrency derivatives exchange dYdX announced plans to end services in Canada, starting with halting the onboarding of new users located in the country. On April 14, the exchange will move all existing Canadian users to “close-only mode,” allowing them to only withdraw funds. 

Coinbase, Celsius and Paxos disclose funds in Signature Bank

The crypto-friendly Signature Bank was a key partner for many crypto firms, some which have been voluntarily disclosing their exposure to the recently closed firm.

Crypto exchange Coinbase, crypto lender Celsius and stablecoin issuer Paxos are among the crypto firms with funds reportedly tied up with the now-shuttered Signature Bank. 

The crypto-friendly Signature Bank was shut down by New York regulators on March 12 in conjunction with the United States Federal Deposit Insurance Corporation to “protect the U.S. economy,” as they claimed the bank posed a “systemic risk.”

Crypto exchange Coinbase tweeted on March 12 that it had around $240 million in corporate funds at Signature that it expected would be fully recovered.

Stablecoin issuer and crypto firm Paxos also came forward, tweeting it had $250 million held at the bank but added it held private insurance that covers the amount not covered by the standard FDIC insurance of $250,000 per depositor.

The Celsius Official Committee of Unsecured Creditors, a body that represents the interests of account holders at the bankrupt crypto lender Celsius, added that Signature Bank “held some of its funds” but did not disclose the amount.

It added that “all depositors will be made whole.”

As Signature Bank serviced so many firms in the crypto industry, those firms with no exposure equally came forward to quell fears about their related exposures.

Robbie Ferguson, co-founder of Web3 game development platform Immutable X, and Mitch Liu, co-founder of the media-focused Theta Network blockchain, separately tweeted that both of their respective companies had no exposure to Signature.

Related: Biden vows to hold those responsible for SVB, Signature collapse

Crypto exchange Crypto.com also reported in a March 12 tweet by CEO Kris Marszalek that it had no funds in the bank

The chief technology officer of stablecoin firm Tether, Paolo Ardoino, similarly tweeted Tether’s non-exposure to Signature Bank.

The announcement of Signature Bank’s forced closure aligned with other banking-related announcements by U.S. regulators.

The Federal Reserve said the FDIC was approved to take actions to protect depositors at Silicon Valley Bank, a tech-startup-focused bank that experienced liquidity issues due to a bank run that spread contagion to the crypto sector.

The Fed also announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.

Here’s how Binance is mitigating its stablecoin needs after BUSD ban

The recent action from Binance comes in the wake of the NYDFS ordering BUSD issuer Paxos to stop minting new coins.

Binance has turned to a new set of stablecoins in the wake of the United States Securities and Exchange Commission’s (SEC) regulatory action against its native stablecoin, Binance USD (BUSD). The SEC had sent a Wells notice, alleging BUSD violates U.S. securities law.

Following the SEC’s notice, the New York Department of Financial Services (NYDFS) asked BUSD issuer Paxos Trust to stop minting new BUSD altogether. The minting ban on BUSD has forced Binance to seek alternative methods to meet its stablecoin needs.

According to on-chain data, the largest cryptocurrency exchange by trading volume is looking to onboard TrueUSD (TUSD) and ad support for a few decentralized stablecoins. The crypto exchange minted 180 million TUSD from Feb. 16–24.

TrustToken, the operator behind U.S. dollar-pegged stablecoin TUSD, has been a Binance partner since June 2019. The partnership allowed Binance to buy TUSD for zero fees and redeem it for fiat currency. Binance’s TUSD relationship has come full circle. In September 2022, Binance auto-liquidated TUSD to BUSD to increase its market share. Now, with a ban on BUSD, Binance is increasingly minting new TUSD to mitigate its stablecoin needs.

Binance CEO Changpeng Zhao has said that the crypto exchange will look at other options to diversify its stablecoin away from BUSD after the regulatory actions. Just a couple of weeks later, Binance announced support for the decentralized borrowing protocol Liquity (LQTY) and launched TrueFi (TRU) perpetual contracts. TRU is the native token of the decentralized finance protocol TrueFi for uncollateralized lending.

Related: Binance tried to hire Gary Gensler in 2018 for closer ties with U.S. regulators: Report

The Binance listing for Liquity and TrueFi proved to be a big boost in their price, with both tokens surging 200% in the last month. Cointelegraph reached out to Binance about its interest in decentralized stablecoins but didn’t get a response by publication.

Decentralized stablecoins became popular with the advent of Terra’s native stablecoin TerraUSD (UST). Market pundits believed decentralized stablecoins would be the next big thing in the crypto ecosystem. However, with the collapse of the Terra ecosystem in May 2022, the opinions about the nascent stablecoin concept changed fast.

The Office of the Comptroller of the Currency used the depeg and collapse of the UST algorithmic stablecoin as an example of stablecoins’ “run risk,” with asset-backed stablecoins also seeing minor depeg events as a result.

Coinbase cutting ties with Silvergate forces crypto hedge fund to find a new bank

A total of five crypto companies ended their partnership with Silvergate Bank on March 2 after a series of lawsuits and investigations against the bank.

Silvergate Bank — a prominent lender to crypto firms — lost five partners on March 2 due to a slew of investigations and lawsuits against it.

Coinbase, Paxos, Gemini, BitStamp and Galaxy Digital were some of the most notable crypto firms using Silvergate as their banking partner. However, the termination of service by Coinbase has also forced a crypto hedge fund to look for an alternate banking partner.

On March 3, a crypto hedge fund called Digital Asset Capital Management (DACM), with assets worth over $400 million, announced it was looking for a new banking partner in Switzerland post-Silvergate chaos. DACM used Silvergate’s real-time network to move funds to and from Coinbase Global’s platform.

In an interview with Bloomberg, DACM co-founder Richard Galvin said that although certain banks in the United States can handle crypto transactions, they are not as crypto-focused as Silvergate. He added that finding a new partner could take time, and they are “speaking to some Swiss banks.”

Switzerland was one of the first countries to regulate and offer banking licenses to crypto banks. SEBA Bank AG, for example, is a fully-regulated institution that secured a banking and securities dealer license from the Swiss Financial Market Supervisory Authority in August 2019.

Silvergate was popular with crypto companies because of its instant and real-time bank transfer services. Thus, moving funds in the absence of such facilities might take longer. In the U.S., Signature Bank seems to be the next popular fintech bank of choice for crypto companies. Coinbase had already shifted its prime customer’s banking transfers to Signature Bank.

Related: Binance banking problems highlight a divide between crypto firms and banks

Signature Bank might be the next best choice for crypto firms, but the question is for how long? In December 2022, Signature Bank announced its intention to withdraw up to $10 billion in deposits from clients holding digital assets, starting a general exodus from the cryptocurrency sector. The bank had already severed ties with Binance, discontinuing its SWIFT banking services for the crypto exchange.

While crypto companies have always found it difficult to find a banking partner due to the absence of clear regulations around the market, the Silvergate saga has raised the difficulty level of transferring cash to crypto exchanges.

Circle, Paxos, Bitstamp and Galaxy join Coinbase in scaling back partnerships with Silvergate Bank

Silvergate is reportedly facing an investigation from the United States Department of Justice over its alleged role in the FTX collapse, involving Sam Bankman-Fried’s account.

Several crypto firms have announced they will scale back or outright terminate their relationship with Silvergate Bank following an announced investigation into its alleged involvement in the FTX collapse.

Amid news that crypto exchange Coinbase would no longer accept or initiate payments with Silvergate, companies including stablecoin issuers Paxos and Circle and Mike Novogratz’s Galaxy Digital have announced similar actions regarding their partnerships with the crypto bank. Galaxy Digital announced on March 2 that it had stopped accepting or initiating transfers to the bank “out of an abundance of caution.”

In separate tweets on March 2, Paxos said it had already “discontinued all [Silvergate Exchange Network] transfers and wires” to the firm’s account but would continue to process outgoing payments. Circle added it was “in the process of unwinding certain services” with Silvergate, and Bitstamp said its bank transfer services would be provided by “other global banking partners”.

“Please be aware that Bitstamp cannot be responsible for any funds deposited into the Silvergate bank account,” said the firm. “If you do choose to deposit funds into this account, you do so at your own risk.”

The termination of partnerships with Silvergate followed reports the bank was facing an investigation from the United States Department of Justice over its alleged involvement in the FTX collapse. Former FTX CEO Sam Bankman-Fried, who has been charged with wire and securities fraud and money laundering, held an account with the crypto bank.

Related: Crypto bank Silvergate ranks as the second- most-shorted stock on Wall Street

Silvergate announced in a March 1 filing with the U.S. Securities and Exchange Commission that it did not expect to submit its report on the 2022 fiscal year by March 16. Shares of the crypto bank’s stock have already fallen more than 55% in the last 24 hours, reaching $5.97 at the time of publication.

Paxos is engaged in ‘constructive discussions’ with SEC: Report

The stablecoin issuer is currently facing a lawsuit from the SEC in which the financial regulator claimed BUSD was an unregistered security.

Stablecoin issuer Paxos was reportedly discussing the Binance USD (BUSD) stablecoin with the United States Securities and Exchange Commission following a Wells notice from the financial regulator.

According to a Feb. 21 Reuters report, Paxos chief executive officer Charles Cascarilla said the firm was “engaged in constructive discussions” with the SEC and would continue to speak in private. The report followed the stablecoin issuer facing a lawsuit from the SEC, in which the regulator alleged BUSD was an unregistered security.

Cascarilla reportedly said that Paxos would consider defending its position that BUSD was not a security through litigation. On Feb. 13, the New York Department of Financial Services — Paxos is licensed in the U.S. state — ordered the company to stop the issuance of BUSD. The firm announced that it would halt minting of the stablecoin starting Feb. 21.

An SEC spokesperson previously told Cointelegraph that it would not comment on the “existence or nonexistence of a possible investigation” with Paxos, but the regulator’s move was the latest in a series of crypto enforcement actions. The SEC announced it had reached an agreement with Kraken on Feb. 9, in which the firm agreed to stop offering staking services or programs to U.S. clients and pay $30 million.

Related: SEC lawsuit against Paxos over BUSD baffles crypto community

The NYDFS investigation against Paxos may have stemmed from a report from Circle, which reportedly sent in a complaint to the state regulator regarding Binance’s reserves. Following the news around BUSD, data from Binance suggested there had been a surge of withdrawals — roughly $2.7 billion in outflows between Feb. 12 and Feb. 13.

Paxos is engaged in ‘constructive discussions’ with SEC: Report

The stablecoin issuer is currently facing a lawsuit from the SEC in which the financial regulator claimed BUSD was an unregistered security.

Stablecoin issuer Paxos was reportedly discussing the Binance USD (BUSD) stablecoin with the United States Securities and Exchange Commission following a Wells notice from the financial regulator.

According to a Feb. 21 Reuters report, Paxos CEO Charles Cascarilla said the firm was “engaged in constructive discussions” with the SEC and would continue to speak in private. The report followed the stablecoin issuer facing a lawsuit from the SEC, in which the regulator alleged BUSD was an unregistered security.

Cascarilla reportedly said that Paxos would consider defending its position that BUSD was not a security through litigation. On Feb. 13, the New York Department of Financial Services — Paxos is licensed in the U.S. state — ordered the company to stop the issuance of BUSD. The firm announced that it would halt minting of the stablecoin starting Feb. 21.

An SEC spokesperson previously told Cointelegraph that it would not comment on the “existence or nonexistence of a possible investigation” with Paxos, but the regulator’s move was the latest in a series of crypto enforcement actions. The SEC announced it had reached an agreement with Kraken on Feb. 9, in which the firm agreed to stop offering staking services or programs to U.S. clients and pay $30 million.

Related: SEC lawsuit against Paxos over BUSD baffles crypto community

The NYDFS investigation against Paxos may have stemmed from a report from Circle, which reportedly sent in a complaint to the state regulator regarding Binance’s reserves. Following the news around BUSD, data from Binance suggested there had been a surge of withdrawals — roughly $2.7 billion in outflows between Feb. 12 and Feb. 13.

Tether market cap nears $70B as SEC crypto crackdown hurts stablecoin rivals

Tether’s USDT has seen its market capitalization rebound to nearly $70 billion as the SEC ordered Paxos to stop issuing BUSD, the third-largest stablecoin.

The United States Securities and Exchange Commission (SEC) plans to sue Paxos for issuing and listing its Binance USD (BUSD) stablecoin, benefitting its top-rival, Tether (USDT), whose market capitalization has risen to multimonth highs. 

BUSD market cap drops by $2 billion

The SEC claims that BUSD, a U.S. dollar-backed stablecoin, is a security, noting that Paxos has violated investor protection laws by white-labeling it.

Related: Paxos ‘categorically disagrees’ with the SEC that BUSD is a security

Since Feb. 13, when the news broke, the BUSD market cap has lost roughly $2 billion, down to around $14 billion as of Feb. 16 — the lowest since January 2022. 

BUSD circulating supply. Source: Messari

As Cointelegraph reported, Binance has seen its withdrawals and BUSD redemptions surge post-Paxos crackdown.

USD Coin market cap downtrend continues

At the same time, USD Coin (USDC), the second-largest stablecoin by market capitalization, has also witnessed capital outflows in reaction to the SEC crackdown news. Its supply decreased from $41.29 billion on Feb. 12 to as low as $40.99 billion on Feb. 14.

However, this figure rebounded to $41.30 billion on Feb. 15 after Circle clarified that it had not received any lawsuit threat from the SEC.

Despite recent inflows, USDC’s market cap remains in a general downtrend since its June 2022 peak of $56 billion — a 25% decline over the past eight months.

Tether dominance jumps, market cap rises over $69 billion

The regulatory crackdown on U.S.-based stablecoin firms has been a boon for top stablecoin Tether, whose market cap has jumped over $69 billion.

Data shows that nearly $890 million of inflows since Feb. 12 has pushed Tether’s market dominance to 51.25% as of Feb. 15.

USDT circulating market cap. Source: Messari

The jump likely suggests that investors were spooked by the crackdown on BUSD and sought safety in Tether USDT. Tether is owned by Hong Kong-based iFinex, which also owns the Bitfinex cryptocurrency exchange.

Related: USDT vs. USDC vs. BUSD: What are the similarities and differences?

Investigators have long attempted to uncover the accounting behind Tether to prove that its circulating USDT supply is not 100% backed by the dollar (and even a mix of other cryptocurrencies, treasury bills, money market funds and other assets) as it claims.

Tether has repeatedly denied the accusations and provides regular assurance opinions signed by third-party accounting companies every quarter.

Tether Reserves breakdown. Source: Tether.to

The latest report from Dec. 31, 2022, states that consolidated assets amounted to at least $67 billion, exceeding consolidated liabilities by at least $960 million.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.