Paxos Ordered To Stop Issuing Binance USD Stablecoin

Lavina Daryanani
Source: FXDailyReport.Com

A few hours back, Watcher Guru reported that stablecoin issuer Paxos is being probed by regulators in New York. Adding to this, it was also revealed that the Securities and Exchange Commission [SEC] is planning to sue the firm for the issuance of Binance USD stablecoin [BUSD]. The SEC is alleging that BUSD is an unregistered security. As a result, the firm is under the radar for “violating investor protection laws.”

Now, according to recent Wall Street Journal article,

The New York Department of Financial Services ordered Paxos Trust Co., which issues and lists Binance’s dollar-pegged cryptocurrency, to stop creating more of its BUSD token.

Paxos will, however, continue to manage BUSD redemptions. Confirming the same, a Binance spokesperson reportedly said,

“Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required. Paxos also assured the funds are safe, and fully covered by reserves in their banks.”

Also Read: SEC to Sue Paxos for Issuing Binance USD Coin

With a market cap of roughy $16 billion at the moment, BUSD is the third largest stablecoin. A recent tweet from Nansen pointed out that around 90% of the asset is held on Binance. Additionally, it revealed that BUSD accounts for around 21.7% of Binance’s current token holdings.

Also Read: SEC May Ban Cryptocurrency Staking: Coinbase CEO

Binance USD Price drops

It still remains unclear if the SEC is planning to sue the firm for issuing the stablecoin or just listing it. Like reported earlier, if it is for the latter, a host of cryptocurrency exchanges could be in trouble as they continue to list BUSD.

On the news of the latest development, BUSD was trading at $0.9998, slightly below the $1 mark. Tether, on the other hand, was priced at $1.001. This could likely mean that investors have already started diverting their funds towards USDT from BUSD.

U.S. regulators have been taking back to back enforcement actions of late. Recently, the Securities and Exchange Commission charged Kraken for offering unregistered securities. As a result, Kraken “immediately” ended its crypto staking-as-a-service platform for U.S. customers and paid $30 million to settle charges.

Parallelly, Coinbase CEO Brian Armstrong recently hinted that regulators could ban cryptocurrency staking altogether for retail investors. The executive went on to affirm that Coinbase will happily defend staking services in court, if needed.

Read More: Coinbase Will Happily Defend Staking Services in Court, Says Brian Armstrong