Blockchain infrastructure platform Paxos Trust Company will halt issuance of new Binance USD (BUSD) stablecoins amid ongoing investigation by New York regulators.
Paxos officially announced on Feb. 13 that the company would be ending its relationship with Binance for the BUSD-branded US dollar peg stablecoin.
As of February 21, Paxos will stop minting new BUSD tokens in accordance with instructions and coordination with the New York Department of Financial Services (NYDFS).
Paxos emphasized that all existing BUSD tokens will remain fully backed and redeemable through the Paxos Trust Company until “at least February 2024.” Clients will be able to redeem their US dollar funds and convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollar (USDP), the firm stated, adding:
“This action does not affect our ability to continue to serve new or existing customers, our continued dedication to increasing our staff or funding our business objectives. Paxos remains committed to becoming the world leader in blockchain tokenization infrastructure […]”
Paxos also noted that the Paxos Trust is a regulated institution supervised by the NYDFS and audited by one of the top four accounting firms, referring to public transparency reporting. The company will continue to maintain its strong regulatory capital to operate USDP, as well as its gold-backed stablecoin Pax Gold (PAXG).
The CEO of Binance, Changpeng Zhao, also took to Twitter on Monday to inform that the exchange was informed by Paxos that they have been ordered to cease new BUSD by NYDFS. The CEO stressed that the stablecoin is issued and managed by Paxos, which implies that there are no issues between Binance and regulators.
“As a result, the market capitalization of BUSD will only decrease over time,” Zhao noted.
BUSD is the seventh largest cryptocurrency by market value at the time of writing, with a market capitalization of $16 billion.. The token is slightly below its $1 level, trading at $0.998, which is not unique to many other reserve-backed stablecoins, as its value sometimes fluctuates between $0.9 and $1.2.
The news comes shortly after the NYDFS abruptly ordered the Paxos Trust to stop issuing BUSD on February 13. Previously, the United States Securities and Exchange Commission issued a notice to Paxos, allegedly claiming that BUSD is an unregistered security.
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