• New York regulator ordered Paxos to stop issuing BUSD, the third-largest stablecoin by market cap.
• The US SEC had issued a wells notice to Paxos alleging that Binance USD is an unregistered security.
• NYDFS has asked Paxos to stop creating more of its BUSD token and monitor redemptions in an orderly fashion.
New York Regulator Orders Paxos To Stop Issuing BUSD
The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos Trust to cease the issuance of dollar-pegged Binance USD (BUSD) stablecoin. This comes shortly after the United States Securities and Exchange Commission (SEC) issued a wells notice to Paxos alleging that Binance USD is an unregistered security.
Paxos To Cease Minting BUSD Tokens
NYDFS has requested Paxos to stop creating more of its BUSD token, while allowing them to manage redemptions of the product according to a statement from Binance. The Department will monitor Paxos closely and verify that they can facilitate redemptions in an orderly fashion subject to enhanced, risk-based compliance protocols.
SEC Notice Alleged Unregistered Security
The SEC had sent a wells notice informing companies about planned enforcement action against them for offering crypto staking services in violation of securities law. This forced Kraken, who was providing such services, to close its staking offering altogether. Coinbase on the other hand has claimed their staking products are not securities and have taken up the fight against this enforcement action from the SEC.
Paxos Intends To End Its Relationship With Binance For BUSD
In response to NYDFS’ order, on February 13th 2023, Paxos notified customers of its intent to end its relationship with Binance for their PAXOS-issued BUSD tokens. This regulatory action on the third largest stablecoin comes in wake of growing scrutiny around the crypto market.
Coinbase Takes Up Fight Against SEC Enforcement Action
In light of these developments Coinbase is taking up the fight by claiming their staking products are not securities and do not violate any laws set forth by the SEC making it clear that they intend on continuing their operations as normal despite any potential enforcement actions from regulators