Money Management

Worried about your BUSD? We’ve answered all your questions here. 

The New York State Department of Financial Services (NYDFS) has ordered crypto firm Paxos to cease minting Binance USD (BUSD). Paxos says it will stop issuing new BUSD from Feb. 21, and that it will work in coordination with the NYDFS to manage the existing reserves. It assured BUSD holders that the tokens are fully backed, and will be redeemable until at least next year.

Paxos also confirmed that the SEC is considering taking action on the basis that BUSD is an unregistered security. In a statement, it said, “Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.” The two moves by authorities have spooked investors and could have wider implications for the crypto industry.

What it means for crypto investors

Several news sources are talking about a regulatory crackdown on crypto, particularly as the Binance USD news comes days after the SEC demanded Kraken cease its staking-as-a-service program. But SEC Chair Gary Gensler has been warning that many crypto exchanges are trading unregistered securities and talking about the dangers of stablecoins since his first speech on crypto back in 2021. It is nothing new.

However, it does raise a number of questions about Binance, BUSD, and stablecoins, some of which we’ve answered below.

What does this mean for BUSD?

Essentially, after Feb. 21, no new BUSD will be issued. But Paxos says all the BUSD in circulation are backed “1:1 with US dollar-denominated reserves.” If you hold BUSD, you should be able to redeem them. Indeed, the NYDFS says it will monitor Paxos closely to ensure this will happen.

The amount of BUSD in circulation will slowly shrink as people redeem their tokens. Binance founder and CEO, Changpeng Zhao tweeted, “BUSD market cap will only decrease over time.” He said that Binance will also move away from using BUSD as the main trading pair on its platform.

What does this mean for Binance and Binance.US?

Binance is one of the biggest crypto exchanges in the industry, and Binance.US — its separate U.S. entity — ranks in CoinMarketCap’s top 10. The news that Paxos will stop issuing BUSD is concerning, as was a move last week from Binance to halt U.S. dollar withdrawals and deposits on its main platform. According to CoinGecko data, Binance Coin (BNB) fell around 10% following the news, but has since recovered slightly.

What impact could this have on other stablecoins?

Stablecoins are crypto tokens that peg their value to another commodity, such as the U.S. dollar or the price of gold. Investors use them to easily move in and out of crypto positions and earn interest. The difficulty, as we saw with the collapse of the Terra platform and its Terra USD, is that those tokens are not the same as traditional money. In a worst case scenario, they can lose their pegs and collapse completely.

BUSD is the third-biggest stablecoin in terms of market cap. Tether (USDT) and Circle’s USD Coin (USDC) both have a bigger market share, and together the three tokens make up over 10% of the total money invested in crypto. While we know that authorities are concerned about stablecoins as a whole, it isn’t clear whether this week’s action is specific to Binance USD or representative of wider issues.

U.S. authorities, including Treasury Secretary Janet Yellen, have called for increased regulation to protect investors from the risks posed by stablecoins. At one point, the Treasury was pushing for stablecoin issuers to be treated like banks and have to follow similar rules. Money held in a bank account is protected by FDIC insurance against bank failure. Stablecoins held on a crypto platform are not.

Are stablecoins securities?

The SEC argues that many cryptocurrencies are in fact securities because they count as an “investment contract.” It says an investment contract exists, “When there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” If a product is a security, it comes under the SEC’s jurisdiction and there are strict rules about how it is traded and information is communicated.

The SEC said that various crypto earn-lend products fitted this description because people expected to earn set rates of interest from the platform’s lending activities. However, this is the first time it has applied this definition to a major stablecoin. Some critics question how a stablecoin — which doesn’t promise to generate profits — can be categorized as a security. Until we see the SEC’s complaint, it is hard to know if it is only concerned about BUSD or all stablecoins.

Bottom line

If you’re a crypto investor, be prepared for both increased regulation and further action from authorities. In the absence of additional rules, the SEC will continue to exert the power it does have, as will other bodies such as the NYDFS. In the long run, more regulatory enforcement could strengthen the industry’s foundations. But in the short term, it will likely lead to more volatility — particularly if many existing cryptos are deemed to be securities. This could make it difficult for U.S. investors to trade them, and difficult for crypto exchanges to do business.

The related issue is that the lack of regulation means we don’t know for sure what is going on behind the scenes at some of these crypto platforms. Trust in crypto exchanges is extremely low right now and investors often only find out about problems when it’s too late. For example, FTX was still tweeting that customer funds were safe, days before the platform froze withdrawals and filed for bankruptcy.

If you keep your funds on any centralized exchange, your assets could be at risk if the platform fails or your account gets frozen. Look into moving your crypto to a non-custodial wallet so you have complete control over your assets. Crypto wallets involve more work and carry additional risks, as you are 100% responsible for their security. But in the current climate, it may be worth the extra hassle.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has positions in Binance Coin. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Beware these renovations if you’re hoping to sell your home. 

There are a lot of reasons people aspire to get a mortgage and become a homeowner, including the appeal of building equity in an asset that can appreciate in value, and setting down roots in a place you love. For those of us who’ve spent years as renters, however, one particularly appealing aspect of homeownership is getting to renovate, remodel, and really make a property your own, in whatever way you want.

Unfortunately, this can be a double-edged sword, especially if you’re hoping to sell your home sometime in the near future. There are a lot of ways to increase the value of your home, such as by planting trees. But there are also particular features that can lower its value. There’s a fine line to walk when you renovate, and if any of these three big projects are on your wishlist, you may want to reconsider — or at least scale back your plans, lest you alienate potential buyers ahead of listing your home for sale.

1. Super customized bathrooms, especially those without a bathtub

Your bathroom is the most private part of your home, and as such, it’s very tempting to gut and remodel it to customize it to your tastes and needs. But stop and really think this project through before moving forward on it, as it’s unlikely that most buyers will share those specific tastes and needs. Of particular note here is the urge to tear out an old grimy bathtub and replace it with a stall shower.

Opinions are mixed, but our research suggests that a certain subset of buyers will want to see at least one bathroom with a bathtub if they’re considering making an offer on your home. NAR’s REALTOR Magazine notes that while the increasing prevalence of oversized shower stalls is appealing to many buyers, if you want to attract the widest pool possible, it’s a good idea to leave at least one tub. Many people enjoy a good relaxing soak, and buyers with kids and pets recognize that it’s much easier and safer to bathe them in a tub.

2. Leaning in on an open-concept floor plan

Open-concept homes have their pros and cons. If your home contains a lot of walls and you’re trying to decide whether to knock some of them down, tread lightly. Taking down a wall between your kitchen and dining room may well be a slam dunk, both for you and for any future potential buyers, as having a larger eat-in kitchen is very convenient. But if your remodeling plans include, say, removing walls to reduce the number of bedrooms, that will likely be less appealing. Just like bathrooms, bedrooms are a private space and having enough of them to house everyone in the family (as well as their activities, such as working from home in a quiet space) is a necessity.

3. Adding fancy kitchen appliances and fixtures

Kitchens are another extremely important part of a home, and if you’re an avid home cook yourself, you may be itching to tear out those 1980s appliances and spring for the high-end convection oven and granite countertops of your dreams. This is an understandable impulse, but it might be a better idea to be a bit more conservative. As is the case with fancy bathroom fixtures, you’ll be limiting yourself to a smaller pool of potential buyers if you design and execute a kitchen remodel straight out of the pages of Bon Appetit.

Even if a potential buyer loves to cook, a high-end kitchen can be intimidating (especially if you’ve also priced your home higher to compensate for the money you put into the project). Zillow recommends looking at smaller changes and fixes to ensure you don’t end up sinking more money into a kitchen remodel than you’ll ever get back — consider painting your cabinets, matching your (non-fancy) appliances, or replacing your faucet.

Ultimately, your home is yours to live in and do as you wish with it, but if you’re trying to ensure that it’s still marketable to a wide swath of buyers when it’s time to sell, keep the above points in mind.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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Image source: Getty Images
What happenedThe Bureau of Labor Statistics just released its latest Consumer Price Index (CPI) reading, and it showed that consumer prices rose 0.5% from December to January. On an annual basis, the index was up 6.4%, which was slightly lower than December’s annual 6.5% increase. So whatThe Bureau of Labor Statistics initially reported a 0.1% decline in consumer prices from November to December. It then adjusted that figure to show a 0.1% month-over-month increase. But either way, January’s 0.5% jump from December is far more substantial. And that could pave the way for more aggressive interest rate hikes on the part of the Federal Reserve.Inflation has slowed since peaking in mid-2022. But we’re a long way off from where the Fed wants inflation to be, which is in the 2% range. “We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2% is going to take some time.”Now whatGiven that the Fed may not be so pleased with this recent CPI reading, consumers will need to brace for the possibility of a more aggressive interest rate hike the next time the central bank meets. Rate hikes have already driven up the cost of consumer borrowing across different categories, from credit cards to auto loans to home equity loans and lines of credit. And if the Fed’s next hike is substantial, borrowers might run into even more issues with affordability.There’s also the issue of higher living costs to grapple with. Many people’s paychecks just aren’t going as far, given the way expenses are rising. Those struggling to keep up with their bills may want to look to the gig economy. It’s booming, and picking up gig work is a good way to shore up your savings account balance and carve out more financial breathing room at a time when living costs are so burdensome.Cash-strapped consumers can also look into any government assistance programs they may be eligible for. Programs like SNAP can make it easier to put food on the table at a time when groceries have gotten expensive. In fact, in January, the cost of food at home rose 0.4% from December and was up 11.3% on an annual basis, so getting help with that specific expense could go a long way.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy. 

What happened

The Bureau of Labor Statistics just released its latest Consumer Price Index (CPI) reading, and it showed that consumer prices rose 0.5% from December to January. On an annual basis, the index was up 6.4%, which was slightly lower than December’s annual 6.5% increase.

So what

The Bureau of Labor Statistics initially reported a 0.1% decline in consumer prices from November to December. It then adjusted that figure to show a 0.1% month-over-month increase.

But either way, January’s 0.5% jump from December is far more substantial. And that could pave the way for more aggressive interest rate hikes on the part of the Federal Reserve.

Inflation has slowed since peaking in mid-2022. But we’re a long way off from where the Fed wants inflation to be, which is in the 2% range.

“We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2% is going to take some time.”

Now what

Given that the Fed may not be so pleased with this recent CPI reading, consumers will need to brace for the possibility of a more aggressive interest rate hike the next time the central bank meets. Rate hikes have already driven up the cost of consumer borrowing across different categories, from credit cards to auto loans to home equity loans and lines of credit. And if the Fed’s next hike is substantial, borrowers might run into even more issues with affordability.

There’s also the issue of higher living costs to grapple with. Many people’s paychecks just aren’t going as far, given the way expenses are rising.

Those struggling to keep up with their bills may want to look to the gig economy. It’s booming, and picking up gig work is a good way to shore up your savings account balance and carve out more financial breathing room at a time when living costs are so burdensome.

Cash-strapped consumers can also look into any government assistance programs they may be eligible for. Programs like SNAP can make it easier to put food on the table at a time when groceries have gotten expensive. In fact, in January, the cost of food at home rose 0.4% from December and was up 11.3% on an annual basis, so getting help with that specific expense could go a long way.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More