Key points to remember
- Paxos will stop minting new BUSD tokens from February 21.
- The decision is due to new instructions from the NYDFS.
- The SEC also reportedly intends to sue Paxos.
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Paxos has been ordered to shut down Binance USD, the third largest stablecoin in the crypto market.
The end of BUSD
Stablecoin Paxos issuer has landed in the regulator’s sights.
The crypto company announcement today that it would stop minting new Binance USD (BUSD) tokens starting February 21, 2022, in accordance with recent instructions from the New York State Department of Financial Services.
Stablecoins are cryptocurrencies designed to stay at par with certain government-issued currencies, such as the US dollar. With a market cap of $15.9 billionBUSD is currently the third largest stablecoin in the crypto market, after Tether’s USDT and Circle’s USDC.
Paxos reported that BUSD remains fully backed by US dollar-denominated reserves and embedded holders will be able to trade the coin until at least February 2024. Other Paxos crypto products, such as Pax Dollar (USDP) and Pax Gold (PAXG), are unaffected by the NYDFS order.
The firm has yet to disclose why the regulatory agency ordered BUSD shut down. However, the Wall Street Journal reported yesterday that the Securities and Exchange Commission planned to sue Paxos for allegedly violating investor protection laws. According to the report, the SEC considers BUSD to be an unregistered security.
Bitcoin lawyer Nic Carter claimed in a blog post last week that the US government was attempting to stealthily cut the crypto industry off from the banking sector and deprive it of important exit routes. The Obama administration used a similar ploy to cripple the online poker industry in the early 2010s. The move against Paxos by the NYDFS and SEC could be seen in this context.
Changpeng “CZ” Zhao, CEO of Binance caught on Twitter to indicate that Binance would continue to support BUSD, but would stop using it as the primary stablecoin for trading.
Disclaimer: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.