Paxos, a stablecoin issuer, has announced that it will stop producing new Binance USD (BUSD) tokens following the request of the New York Department of Financial Services (NYDFS). This news came shortly after reports of the US Securities and Exchange Commission (SEC) threatening legal action against Paxos for allegedly selling BUSD as an unregistered security.
BUSD is a stablecoin issued and managed by Paxos under the partnership with Binance. Following the news of the SEC’s potential legal action, Binance announced that it would be reviewing projects in uncertain markets where regulatory uncertainty could harm its users.
The NYDFS explained that it instructed Paxos to stop minting BUSD due to several unresolved issues regarding Paxos’ oversight of its relationship with Binance. Paxos confirmed that it is ending its relationship with Binance for BUSD. The NYDFS added that it is closely monitoring Paxos to ensure the company can facilitate redemptions in an orderly fashion while following enhanced, risk-based compliance protocols.
Paxos assured its customers that all BUSD tokens issued by Paxos Trust are fully backed 1:1 with US dollar-denominated reserves and held in bankruptcy remote accounts. Following the news of the potential legal action by the SEC, around $52 million worth of BUSD were sent to exchanges within 24 hours, indicating a desire by users to convert them into fiat or other stablecoins.
In the last 24 hours, the native token of BNB Chain has fallen over 7%, while BUSD has seen significant inflows to cryptocurrency exchanges.
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