• 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 the company of planned enforcement action on allegations that Binance USD is an unregistered security.
• Paxos will stop issuing new BUSD tokens starting February 21 and end its relationship with Binance for the branded BUSD stablecoin, but the NYDFS will keep a hawkish eye to ensure orderly redemptions.
New York Regulator Orders Stop to Issuing of BUSD Stablecoin
The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos to cease creating new Binance USD (BUSD) tokens, according to an official statement on Monday. This comes shortly after the SEC issued a ‚wells notice‘ to Paxos, informing the company of planned enforcement action on allegations that Binance USD is an unregistered security.
Paxos Must Cease Issuing New Tokens
Paxos must now abide by this directive from the NYDFS and stop issuing new BUSD tokens starting February 21st and ending its relationship with Binance for this branded stablecoin. The regulator will also be keeping a hawk eye out in order to ensure orderly redemptions of these tokens.
What Is BUSD?
BUSD is built atop the Ethereum blockchain and backed 1:1 by U.S. Treasury and Treasury Reverse Repurchase Agreements. As of January 31, 2021,the issuer reported $16 billion in holdings related to this product alone. Notably, Paxos‘ own version of this token is separate from that which is self-issued by Binance itself – though they are similar enough in name that they can be confused easily at first glance!
Possible Enforcement Action From SEC
The NYDFS did issue a warning about „several unresolved issues“ related specifically to how Paxos oversees its relationship with Binance when it comes to this product – thus why it chose now as an appropriate time for them allay any concerns about possible enforcement action from the SEC regarding these tokens being unregistered securities or not..
Conclusion
Given all factors involved here, it should come as no surprise that both regulators have chosen now as their moment to take further steps towards ensuring consumer protection when it comes digital asset products such as these – even if those steps might lead us into uncharted territory and cause some disruption along way!