• The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos to stop issuing the dollar-pegged Binance USD (BUSD) stablecoin.
• This comes shortly after the SEC issued a ‚wells notice‘ to Paxos, informing them of planned enforcement action on allegations that BUSD is an unregistered security.
• Paxos must stop creating new BUSD tokens and end its relationship with Binance for the branded BUSD stablecoin.
Paxos Ordered To Stop Issuing BUSD Stablecoin
The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos to cease creating new Binance USD (BUSD) tokens, citing „several unresolved issues related to Paxos‘ oversight of its relationship with Binance“. The issuer will have to stop issuing new BUSD tokens starting February 21 and end its relationship with Binance for the branded stablecoin offering.
SEC Issues Wells Notice Over Unregistered Security Allegations
This order comes shortly after the Securities and Exchange Commission issued a ‚wells notice‘ to Paxos, informing them of planned enforcement action on allegations that the BUSD token is an unregistered security.
Paxos’ Own Stablecoins Remain Unaffected
Though related to Binance’s self-issued Binance-pegged version of their own token, designated as ‘BUSD’, this separate product from Paxos remains unaffected by this directive from the NYDFS regulators. The department has not authorized ‘Binance-peg’ any other version of their token on any other blockchain platform either.
Backing Of 1:1 By US Treasury & Reverse Repurchase Agreements
Paxos’ own version of the token is built atop Ethereum’s blockchain infrastructure and backed 1:1 by U.S Treasury and Treasury Reverse Repurchase Agreements, as recorded in their January 31 holdings report which revealed $16 billion in assets held by them at that time.
NYDFS Keeping A Hawkish Eye On Redemptions
Despite ordering the suspension of minting operations for these tokens, the NYDFS will keep a vigilant eye over redemptions so as ensure they take place in an orderly manner – this suggests they are looking out for investors who may be holding these tokens currently or may be considering investing in them soon.