Paxos to Halt BUSD Creation & Cut Ties with Binance USD

• New York Department of Financial Services (NYDFS) has ordered Paxos to suspend BUSD minting and sever ties with Binance USD.

• The regulator cited “several unresolved issues related to Paxos’ oversight of its relationship with Binance”.

• Paxos will stop issuing new BUSD tokens starting February 21, but the NYDFS will keep a hawkish eye to ensure orderly redemptions.

Paxos Ordered To Suspend BUSD Minting And Sever Ties With Binance USD

The New York Department of Financial Services (NYDFS) has issued an order to blockchain company Paxos to stop issuing the dollar-pegged stablecoin, Binance USD (BUSD). This follows allegations from the SEC that BUSD is an unregistered security. As part of this directive, Paxos will cease creating new tokens and end its relationship with Binance for the branded stablecoin starting February 21st.

Reason For Directive

The NYDFS’s investor alert cites „several unresolved issues related to Paxos‘ oversight of its relationship with Binance“. Notably, the department does not authorize the self-issued version of the coin on any blockchain. This means that platforms such as Ethereum can wrap and issue separate versions without being directly regulated by the NYDFS.
Even though their own stablecoin remains unaffected by this directive, they are still required to cease minting new coins and end their relationship with Binance for their branded version of it.

What Is The Impact?

Paxos has reported $16 billion in holdings as of January 31st and provides a 1:1 backing for US Treasury Reverse Repurchase Agreements via their product built atop the Ethereum blockchain. By suspending minting activities, investors could experience an impact on liquidity levels as well as increased volatility in asset prices due to reduced supply of a stablecoin held in trust by a regulated issuer like Paxos..

SEC Wells Notice

The SEC had sent a ‚wells notice‘ informing them about potential enforcement action over allegations that it was operating an unregistered security prior to this directive from NYDFS. As such, investors should be aware that they may face legal repercussions if they continue trading or holding this digital asset after February 21st when all transactions will be stopped resulting in no more new coins created by Paxos or issued under its branding agreement with Binance.

Conclusion

In conclusion, given these recent developments concerning one major issuer of stablecoins in circulation today – especially regarding allegations made against it by both regulators – investors should proceed with caution when dealing in any form of cryptocurrency assets going forward . Despite this news from NYDFS however, there are still many other reputable issuers available who provide just as secure options for transacting digitally without having to worry about any kind regulatory implications or risks associated with potential enforcement action taken against them down the line.