Paxos, the issuer of regulated stablecoins, has declared that it will end its partnership with Binance, and discontinue the issuance of new Binance USD (BUSD) stablecoin tokens, effective February 21, due to the New York Department of Financial Services (NYDFS) regulatory scrutiny.
Key Takeaways
- Paxos terminates Binance association over BUSD stablecoin after NY regulator action.
- Paxos and Binance have reassured investors that their funds are safe and redeemable.
- The SEC is purportedly planning to take legal action against Paxos for violating investor protection laws.
- NY action against Paxos follows last week’s SEC settlement with the Kraken exchange.
NYDFS Compels Paxos to Stop BUSD Issuance
The NYDFS informed Paxos to put an end to minting BUSD tokens because of “several unresolved issues related to Paxos’ oversight of its relationship with Binance through Paxos-issued BUSD.”
This is not the first time that Binance, the world’s biggest crypto exchange, has faced trouble with U.S. regulators. Binance has been under investigation since 2018 over its compliance with U.S. anti-money laundering rules, as reported by Reuters.
As per Coinmarketcap, BUSD is the seventh-largest stablecoin by market cap and its value its linked to the US dollar. In a blog post dated November 2022, Binance said it allows Paxos to mint new BUSD on the Ethereum blockchain and provides it licensing support. The post also said that the BUSD token was “approved by the New York Department of Financial Services” with reserves held only in Federal Deposit Insurance Corporation (FDIC)-approved accounts.
“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 assured investors in a statement.
Binance CEO Changpeng Zhao also took to Twitter on Monday to reassure investors that funds were safe in BUSD. He also confirmed that Paxos would continue to manage redemptions of the BUSD stablecoin.
The NYDFS made it clear that it “is monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols.”
Paxos offered BUSD alongside its USDP stable
