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Paxos has been ordered to discontinue Binance USD, the third largest stablecoin in the crypto market.
The End of BUSD
Stablecoin issuer Paxos has landed in regulator crosshairs.
The crypto company announced today that it would stop minting new Binance USD (BUSD) tokens starting February 21, 2022, in accordance with recent instructions by the New York State Department of Financial Services.
Stablecoins are cryptocurrencies that are designed to stay at parity with chosen government-issued currencies, like the U.S. dollar. With a market capitalization of $15.9 billion, BUSD is currently the third biggest stablecoin in the crypto market, after Tether’s USDT and Circle’s USDC.
Paxos indicated that BUSD remained fully collateralized with US dollar-denominated reserves, and that onboarded holders would be able to redeem the coin until at least February 2024. Other Paxos crypto products, such as Pax Dollar (USDP) and Pax Gold (PAXG), remain unaffected by the NYDFS order.
The firm has yet to disclose why the regulatory agency ordered for BUSD to be shut down. However, the Wall Street Journal reported yesterday that the Securities and Exchange Commission was planning on suing Paxos for allegedly violating investor protection laws. According to the report, the SEC believes BUSD to be an unregistered security.
Bitcoin advocate Nic Carter claimed in a blog post last week that the U.S. government was attempting to stealthily cut off the crypto industry from the banking sector and deprive it of significant off-ramps. The Obama administration employed a similar scheme to cripple the online poker industry in the early 2010s. The move against Paxos by both the NYDFS and the SEC could be seen in this context.
Binance CEO Changpeng “CZ” Zhao took to Twitter to indicate that Binance would continue to support BUSD, but that it would move away from using it as its main stablecoin for trading.
Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.