Binance USD dealt fatal blow by US regulator
Important takeaways
- Paxos will stop minting new BUSD tokens starting February 21st.
- The decision came after new instructions from the NYDFS.
- The SEC also plans to sue the company.
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Paxos has been ordered to liquidate Binance USD, the third largest stablecoin in the crypto market.
The end of BUSD
Stablecoin issuer Paxos has landed in the regulator’s crosshairs.
The crypto company announced today that it would stop minting new Binance USD (BUSD) tokens as of February 21, 2022, in accordance with recent instructions from the New York State Department of Financial Services.
Stablecoins are cryptocurrencies designed to remain at parity with selected government-issued currencies, such as the US dollar. With a market cap of $15.9 billion, BUSD is currently the third largest stablecoin in the crypto market, behind Tether’s USDT and Circle’s USDC.
Paxos indicated that BUSD remained fully secured by US dollar-denominated reserves, and that onboard 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 – the order.
The firm has not yet disclosed why the regulatory agency ordered BUSD to close. 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 believes that BUSD is an unregistered security.
Bitcoin Lawyer Nic Carter claimed in a blog post last week that the US government sought to stealthily cut off the crypto industry from the banking sector and deprive it of significant exits. The Obama administration used a similar scheme to cripple the online poker industry in the early 2010s. The move against Paxos by both the NYDFS and the SEC can 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.