Aave Community Mulls Freezing Binance Stablecoin Amid SEC Pressure

Members of the Aave community are examining whether to freeze the Binance’s BUSD stabelcoin on the platform after the token’s issuer Paxos was sued by the SEC today.

Aave is a decentralized finance protocol (DeFi) that allows users to lend, borrow and stake with others through smart contracts.

A governance proposal by Aave community member MarcZeller said that as Paxos will no longer issue new BUSD tokens, the supply will trend to zero, which could «hurt peg arbitrage opportunity and asset peg.»

Though there is no risk to the protocol, «BUSD has no prospect for growth,» MarcZeller added.

Thus far, the proposal has received a series of positive responses, with one member going further and suggesting Aave liquidate its BUSD holdings to mitigate further risks.

Binance’s BUSD stablecoin fell from its U.S. Dollar peg earlier today as investors attempt to safeguard their holdings by moving funds into other stablecoins like tether (USDT) and USD Coin (USDC).

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