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According to a statement released by Paxos on Monday, the company behind Binance stablecoin has received an order from New York’s top financial regulator to stop releasing the currency.
One of the biggest stablecoins in the world, the Binance stablecoin, is issued and redeemed by the New York-based Paxos Trust Company, which is under the supervision of the New York Department of Financial Services.
According to Paxos’ website, the token is backed by reserves of regular cash and U.S. Treasury bonds. It is intended to maintain a constant value and is frequently utilised by crypto traders at Binance.
Paxos said it would stop issuing new BUSD as of Feb. 21 “as directed by and working in close coordination with the New York Department of Financial Services”. The statement said Paxos will continue supporting and redeeming pre-existing BUSD until “at least February 2024.
The chief executive officer of Binance, Changpeng Zhao, stated on Twitter: “We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS).”
Since Paxos’ bank reserves fully covered the funds, he added, “as a result, BUSD market cap will only drop over time.”
NYDFS did not immediately respond to a request for comment sent outside U.S. business hours.
According to market watcher CoinGecko, Binance USD is the seventh-largest cryptocurrency, with more than $16 billion in circulation. In addition, Zhao predicted that users will “migrate to other stablecoins over time” and that Binance would “continue to support BUSD for the foreseeable future.”
The Wall Street Journal broke the news of the NYDFS raid first. It coincides with a broader crackdown on cryptocurrencies and Binance by American regulators. According to Reuters, the Justice Department is looking into Binance for alleged money laundering and sanctions infractions.
Using anonymous sources, the WSJ claimed on Sunday that the Securities and Exchange Commission had informed Paxos that it intends to sue the business because Binance USD is an unregistered security.
The SEC also did not immediately respond to a request for comment.
Zhao stated on Twitter that “‘IF’ BUSD is ruled as a security by the courts, it will have major ramifications on how the cryptocurrency business will expand (or not develop) in the areas where it is ruled as such.” He claimed to be unaware of the complaint.
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