Paxos Ceases Issuance of Binance USD at Direction of New York Department of Financial Services
Stablecoin issuer Paxos has announced that it will stop minting new Binance USD (BUSD) tokens at the direction of the New York Department of Financial Services (NYDFS). This news comes just after a report of the threat of legal action from the U.S. Securities and Exchange Commission (SEC).
BUSD is a Binance-branded stablecoin issued and managed by Paxos. Following the news of the SEC’s legal action, Binance issued a statement that it would be reviewing projects in uncertain markets where regulatory uncertainty could cause detriments to its users.
NYDFS said that it had instructed Paxos to cease minting BUSD due to several unresolved issues related to Paxos’ oversight of its relationship with Binance. Paxos said it is ending its relationship with Binance for BUSD.
“The Department is monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols,” NYDFS said in a statement.
“All BUSD tokens issued by Paxos Trust have and always will be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,” Paxos said in a statement on Monday.
Following Sunday’s news, some $52 million of BUSD were sent to exchanges in a 24-hour period, indicating a desire, as per data by CryptoQuant, indicating a desire by users to turn them into fiat or other stablecoins.
In the past 24 hours, BNB Chain’s native token slid over 7% while BUSD saw massive inflows to crypto exchanges.
The news of Paxos ceasing the issuance of BUSD at the direction of the NYDFS is a reminder of the importance of regulatory compliance in the cryptocurrency space. Companies must ensure that they are adhering to all applicable laws and regulations in order to protect their customers and maintain a healthy business. The SEC’s warning to crypto firms to comply with rules is a further reminder of the need for companies to stay up to date with the latest regulations.