coininsider.com
Markus Thielen, the head of research at Matrixport believes that the recent scrutiny of Paxos and its Binance USD ($BUSD) token is not a direct attack on stablecoins, but rather an issue with Paxos’s oversight of the token.
In an analysis, Thielen suggests that Paxos may have fallen short in conducting proper risk assessments and due diligence of Binance and the BUSD customers, resulting in the probe by the New York Department of Financial Services (NYDFS).
In addition, Paxos has recently confirmed that it received a Wells notice from the United States Securities and Exchange Commission (SEC) for allegedly failing to register the BUSD offering under federal securities laws. This has added to the growing list of cryptocurrency exchanges and companies facing regulatory action from the SEC, including the recent crackdown on Kraken.
Despite these regulatory actions, Paxos has maintained that the BUSD tokens are fully backed 1:1 with US dollar reserves and held in segregated, bankruptcy-remote accounts. Binance has also echoed this statement, referring to BUSD as one of the most transparent stablecoins.
However, the recent actions against BUSD have caused some concerns over the future of stablecoins. Thielen has urged the industry not to be overly worried, pointing out that there are no other allegations against Paxos besides the current BUSD issue. Additionally, some of the regulatory actions could have been triggered by the recent incident when Binance mixed customer funds with collateral.
Meanwhile, with the investigations and the crackdown on Paxos, Binance and BUSD has seen a massive surge of withdrawals. Over t24 hours, 342 million BUSD were burned as customers took their funds from the exchange.
#PeckShieldAlert ~342M $BUSD have been burned at Paxos Treasury within the last 24 hours, $BUSD MarketCap: $15.8Bhttps://t.co/BMeVokqVE6 pic.twitter.com/hJdnixxbtD
— PeckShieldAlert (@PeckShieldAlert) February 14, 2023
Additionally, data from Nansen showed $788.5 million withdrawn from Binance over 24 hours.