NYDFS Shuts Down Binance USD Issuance, Questions Unresolved Issues

Paxos Ordered to Stop Issuing Stablecoin Backed by Cash and US Bonds, as Binance CEO Points to Potential Industry Implications

New York’s financial regulator has ordered Paxos, the company behind the stablecoin of the major exchange Binance, to stop issuing the token, Paxos and the regulator announced in separate announcements today.

- Advertisement -

The Binance USD (BUSD) stablecoin, one of the world’s largest, is issued and redeemed by New York-based Paxos Trust Company, which is regulated by the New York Department of Financial Services (NYDFS).

The token, which is designed to hold a fixed value and is widely used by cryptocurrency traders on Binance, is backed by stocks of regular cash and US bonds, according to the Paxos website.

The NYDFS said in a statement that it ordered Paxos to stop “cutting” BUSD “as a result of several unresolved issues related to its oversight of its relationship with Binance through the BUSD issued by Paxos.” The regulator’s statement did not provide details of what those issues were.

Binance CEO Changpeng Zhao wrote in a series of tweets earlier on Monday that the regulator’s decision meant that “the market capitalization of the BUSD market will decrease over time,” adding that Paxos assured Binance that the funds were fully covered by Paxos’ bank reserves.

BUSD is “wholly owned and managed by Paxos,” Zhao said.

Binance USD is the seventh largest cryptocurrency, with more than $16 billion in circulation, according to market monitoring firm CoinGecko. Zhao said Binance will “continue to support BUSD for the foreseeable future” and that he sees users “moving to other stablecoins over time.”

- Advertisement -

Paxos said in a statement that it will stop issuing new BUSD from February 21 and will continue to support and redeem pre-existing BUSD until “at least February 2024”. NYDFS noted that it is “closely monitoring Paxos to verify that the company can conduct redemptions in a regular manner.”

The NYDFS move comes amid a broader crackdown on cryptocurrencies and Binance by US regulators. The Department of Justice is investigating Binance for possible violations of money laundering laws, Reuters previously reported. Binance has said it regularly works with regulatory agencies to address questions they may have.

The WSJ, citing unnamed sources, reported on Sunday that the US Securities and Exchange Commission (SEC) has informed Paxos that it intends to sue the company, claiming that Binance USD is an unregistered security. The SEC did not immediately respond to a request for comment.

- Advertisement -

“If the BUSD is ruled as a ‘security’ in the courts, this will have profound implications for how the cryptocurrency industry will (or will not) develop in the jurisdictions where it is ruled as such,” Zhao wrote on Twitter. He said he had no information about the lawsuit.

Read Also

SEC Crackdown on Staking Sparks Controversy

Binance Leads Crypto Industry Effort to Restore Trust

Game of Coins: Inside the Paxos-Gemini Stablecoin Discount War

Gold-Backed Cryptocurrency Launches from Paxos

Binance Adds Two Months Old ERC-20 Token Paxos (PAX) As Base Currency

Previous Articles:

- Advertisement -

Latest

Bitcoin Drops 10% From Highs Amid Quantum Computing Warnings

Bitcoin dropped nearly 10% from its record high, falling close to $103,000 after reaching $112,000 last week. BlackRock warned that advances in quantum computing could...

Czech Justice Minister Resigns Over $45M Bitcoin Donation Scandal

Czech Justice Minister Pavel Blazek resigned after controversy over accepting and selling Bitcoin from a convicted criminal.The Justice Ministry auctioned nearly 500 Bitcoin, raising...

Uniswap (UNI) Rebounds Above $6 After Brief Uptrend Breakdown

Uniswap's UNI token dropped below its key uptrend line following a failed hold above the $6.00 support level.High trading volumes accompanied the decline, including...

Michael Saylor Invites Joe Rogan to Discuss Bitcoin on Podcast

Michael Saylor has shown interest in discussing Bitcoin on The Joe Rogan Experience podcast.The idea has generated excitement in the Bitcoin community, with some...

Congress Debates Stablecoin Bill Amid Rising Bank and Crypto Tensions

U.S. lawmakers are moving forward with the Senate Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, with debates set to resume after...

Must Read

Are Cryptocurrency Securities?

TL;DR - Cryptocurrencies are not typically considered securities, as they are decentralized digital assets that operate independently of any central authority or government. However,...