New York regulator orders Paxos to stop minting BUSD

Paxos has been ordered to stop issuing BUSD tokens at the direction of the New York Department of Financial Services (NYDFS). This was reported by the media referring to a message from Binance.

BUSD is a Binance stablecoin pegged to the US dollar. It was issued in 2019 jointly by Paxos and Binance, with approval from the NYDFS. BUSD is the third largest stablecoin by capitalization, behind only USDC and USDT.

According to the NYDFS, it had instructed Paxos to cease minting BUSD due to the fact that the company cannot safely issue it. The representatives of the NYDFS reported that Paxos did not conduct the necessary verification of Binance users and issued BUSD tokens required to prevent malefactors from using the exchange.

Earlier it was reported that the regulator is investigating Paxos. NYDFS did not say about the reasons for the inspection, noting that it constantly monitors the activities of organisations in order to identify risks related to the volatility of the crypto market.

The U.S. Securities and Exchange Commission (SEC) also turned attention to the activities of Paxos. According to the Commission, the token is not a registered security, so it plans to sue the company for violating the law on investor protection.

After it became known about the termination of the Binance token emission, it immediately lost in value. On February 13, exchange users withdrew assets worth more than $900 million. Trades paired with BUSD account for more than a quarter of the total trading volume on the exchange. Binance CEO Changpeng Zhao noted that due to the restriction of the new tokens’ emission, the asset value will decrease, and investors will use other stablecoins.

Last year, Circle, the company that emits the competing USDC stablecoin, lodged a complaint against Binance with the New York regulator. Circle representatives reported that they found that Binance doesn’t store enough cryptocurrency to support the issued tokens.