No more Binance USD (BUSD) as stablecoin issuer ordered to stop

abdelaziz Fathi

The New York Department of Financial Services (NYDFS) has ordered stablecoin issuer, Paxos, to stop issuing Binance-branded stablecoin BUSD, the world’s third largest stablecoin.

Binance USD

New York regulators directed Paxos Trust Co., which has its own stablecoin, Pax dollar (USDP), to stop creating more of BUSD dollar-pegged tokens. To assure holders, Binance said in a statement that Paxos will continue to manage redemptions of BUSDs. The Wall Street Journal first reported the news.

“Paxos has informed us that they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS). BUSD is a stablecoin wholly owned and managed by Paxos. As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required,” the statement reads.

The move comes a few days after reports surfaced that the NYDFS is investigating Paxos, possibly over whether it was meeting rules around custody of client crypto assets.

The SEC also plans to sue Paxos Trust for violating investor protection rules in relation to Binance stablecoin. The issuer was already told of the planned enforcement action as the regulator claims that Binance USD is an unregistered security.

Per a Bloomberg report, the full scope of the investigation is unclear. But the US regulators have been questioning crypto firms over their practices around handling clients’ digital assets. The probe has gathered pace in the wake of the collapse of Sam Bankman-Fried’s crypto empire.

An NYDFS spokesperson declined to comment on ongoing investigations but told CoinTelegraph that “The department is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers and the institutions themselves from crypto market volatility we are experiencing.”

After the collapse of the Terra algorithmic stablecoin in May, which wiped billions off the broader cryptocurrency market, NYDFS refocused attention on the $150 billion stablecoin industry. Since then, regulators have been concerned that stablecoins without sufficient reserve-backing are prone to bank runs.

Paxos is a New York-based exchange and stablecoin issuer, whose status as a licensed financial services company in the US allows it to offer different products, such as crypto trading and settlement, and custody services. Further, the firm can issue tokenized securities and provides its customers with access the traditional banking system.

The unique position has enabled Paxos to sign big enterprise clients, such as Interactive Brokers, Revolut, Crédit Suisse, Société Générale and StoneX. It has also joined forces with the world’s most influential crypto exchange, Binance, to secure the NY regulator’s approval to launch a USD-backed stablecoin.

Read this next

Digital Assets

Rockstar Co-Founder and All-star Line Up Join Advisory Board to Take Metacade into Post Beta Orbit

Metacade, the revolutionary Web3 gaming platform, prepares to streak out of beta with a slew of ground-breaking initiatives that will redefine the way blockchain games are developed.

Retail FX

Prop firm The Funded Trader shuts down, claims relaunch in April

Prop trading firm The Funded Trader has ceased all operations, with claims for a relaunch in the near future.

Digital Assets

Ethereum-Based Tokenized Real Estate Platform USP Launches On Republic

How This Californian Startup Is Revolutionizing Real Estate Investment through Ethereum-Based Tokenization.

Digital Assets

Sui Spikes in Weekly DEX Volume, Joins Top 10 of All Blockchains

March DEX volume on Sui stands at over $2.88B – up more than 49% from February – with decentralized exchange Cetus and wholesale liquidity layer DeepBook leading.

Digital Assets

Prisma Finance suffers $10 million crypto exploit, attack ongoing

Liquid staking protocol Prisma Finance fell victim to a security exploit on March 28, resulting in nearly $10 million in Prisma mkUSD and wrapped stETH being stolen by hackers.

Digital Assets

Masa and LayerZero: Bridging Blockchains for Data Sovereignty

Masa Network is poised to revolutionize the personal data landscape with its upcoming launch as a cross-chain platform, making it accessible on a variety of blockchains right from the start.

Digital Assets

Big Time Generates over $100M in Revenue since Preseason

Innovative game developer Big Time Studios announces that its highly anticipated free-to-play multiplayer action/MMO RPG Big Time, has generated $100M in revenue. According to the team, players transacted a total volume of over $230M, without selling a single token.

Digital Assets

Centralized exchanges are 10 times more popular than DEXs in Western Europe

Western European traders are found to prefer centralized exchanges over decentralized ones as CEX traffic outpaces DEXs by a factor of ten.

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

<