New York-based blockchain platform Paxos Trust Company has ceased the issuance of Binance USD (BUSD) stablecoins in light of an ongoing investigation by New York regulators.
Effective Feb. 21st, the company will no longer mint new BUSD tokens. This is as directed by the New York Department of Financial Services (NYDFS).
Paxos emphasized that all existing Binance USD tokens will remain fully backed and redeemable until February 2024. The firm stated that customers could redeem their funds in U.S. dollars. They could also convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollars.
The NYDFS oversees Paxos Trust, a regulated institution, and a top-four accounting firm audits it. It has solid regulatory capital to operate USDP and its gold-backed stablecoin Pax Gold (PAXG).
According to the press statement from the comapny:
Paxos continues to maintain strong regulatory capital to protect customers, as well as a strong corporate balance sheet to support our long-term business goals. This action does not impact our ability to continue serving new or existing customers, our continued dedication to grow our staff or fund our business objectives.
Binance CEO Reassures BUSD Holders
Changpeng Zhao, the CEO of Binance, confirmed on Twitter that Paxos issues and manages BUSD. He also confirmed that there are no problems between Binance and regulators. Zhao added that due to the halt, the BUSD market cap would only decrease over time.
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The decision to halt the issuance of BUSD comes shortly after the United States Securities and Exchange Commission issued a notice to Paxos. The notice reportedly alleged that BUSD is an unregistered security. The news follows the NYDFS abruptly ordering Paxos Trust to stop the issuance of BUSD on February 13th.
Additionally, Binance plans to adjust its products and shift from using BUSD as the primary trading pair for multiple tokens. The CEO warns that the SEC and NYDFS actions could greatly affect the future of the crypto world. If BUSD is deemed a security by the courts, it will significantly impact the growth of cryptocurrencies in affected areas.
This article conveys general information and the opinions expressed should not be considered personal advice for any individual or specific security or investment product.