Government Cracks Down on Crypto Industry With Flurry of Actions

On Monday, the New York Department of Financial Services said it had ordered Paxos to stop issuing BUSD, a popular stablecoin that is affiliated with Binance, the world’s largest crypto exchange. That same day, Paxos said it had received a letter from the S.E.C. warning that the company might soon be charged with securities violations over BUSD.

“We’re seeing an arms race between federal agencies in the U.S., competing to show how tough they can be on crypto,” said Jason Weinstein, a lawyer at Steptoe Johnson who works on crypto matters. “There are a lot of sheriffs in town, and each is trying to assert control over the same town.”

Some of the actions have raised fears that crypto firms may find it harder to develop relationships with the traditional finance system. In January, the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint statement that outlined in stark terms the risks of becoming entangled in crypto.

“The administration’s efforts are no secret,” Nic Carter, a crypto investor, wrote in a widely cited blog post last week. He added that “exchanges might be shut off from the banking system entirely.”

As dire predictions have spread, crypto executives have taken to Twitter to attack the S.E.C. A few days after Kraken settled with the agency, the company’s founder, Jesse Powell, posted an obscene meme about Mr. Gensler. It was later deleted. Kraken did not respond to a request for a comment.

“There’s no question that this current moment is different,” said Mr. Grewal, the Coinbase lawyer. “Our mind-set is that we’re prepared to engage for as long as it takes to get the rules right.”

Matthew Goldstein contributed reporting.

Article source: https://www.nytimes.com/2023/02/18/business/crypto-crackdown-regulation.html