In light of the continuing investigation by New York regulators, blockchain infrastructure platform Paxos Trust Company will stop issuing new Binance USD (BUSD) stablecoins. The third-largest stablecoin in the world, Binance USD, is purportedly under scrutiny by the SEC.
The Securities and Exchange Commission intends to file a lawsuit against cryptocurrency trading company Paxos Trust for creating and listing the BUSD stablecoin without first registering it as a security, according to the Wall Street Journal.
“BUSD will remain fully supported by Paxos and redeemable to onboarded customers through at least February 2024. New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust,” Paxos said in a statement.
According to a statement from Binance, Paxos is expected to keep overseeing product redemptions. The latest regulatory action occurs while the market for cryptocurrencies experiences increasing unpredictability. The SEC recently also declared that open violations of the securities laws are caused by crypto staking.
Earlier today, CZ, the founder, and CEO of Binance, tweeted that Paxos had notified him that the New York Department of Financial Services, where Paxos is registered and subject to regulation, had ordered the business to stop issuing BUSD.
He also revealed and said, “On the alleged SEC vs Paxos lawsuit, I have no information about it, other than public news articles. The lawsuit is between the US SEC & Paxos.I am not an expert on US laws. But personally, I agree with Mile’s logic here (not that it means much)”
Since 2019, when Paxos Trust entered into a licensing arrangement with Binance, the largest cryptocurrency exchange in the world, to use its name and brand.
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Paxos recently announced that it has stopped the issuance of its popular BUSD digital asset, a stablecoin issued and backed by Binance, the world’s largest digital asset exchange. The halt in issuance comes after the New York State Department of Financial Services (NYDFS) has ordered the firm to halt all activities related to the issuance and redemption of BUSD until it receives all required authorizations.
Binance CEO Changpeng Zhao, or CZ, spoke about the status of BUSD and the plans for the future in a recent interview. CZ stated that Paxos, who is the issuer of BUSD, has worked diligently on getting the appropriate approvals from NYDFS, but due to ongoing regulatory constraints, Paxos has chosen to “proceed with caution” and suspend issuance of the stablecoin. CZ also noted that Paxos is continuing to work to obtain the necessary regulatory approvals and is looking forward to resolving the matter in the near future.
At present, BUSD continues to remain fully redeemable and Binance continues to partner with Paxos to provide users with stablecoin swaps and cash services. CZ also noted that the suspension of BUSD issuance has not affected Binance’s access to liquidity and the exchange continues to provide a reliable platform for customers to safely transact and trade digital assets.
In the interview, CZ reiterated Binance’s commitment to regulatory compliance, noting that the exchange is working hard to ensure that the issuance of BUSD meets all the applicable state and federal regulations. He also encouraged customers to stay patient as the issue is being addressed and that there should be no need to worry as BUSD continues to be a secure and reliable digital asset backed by Binance.
Ultimately, it is up to regulatory authorities on both the state and federal level to determine when and if BUSD can resume operations. Until then, Binance and Paxos will continue to seek regulatory approvals to ensure that the stablecoin meets all necessary qualifications. Although the process may take some time, Binance and Paxos remain confident in their ability to move towards the successful issuance and redemption of BUSD.