New York orders Binance stablecoin backer to stop minting tokens
The company says it will not fight the ruling and will continue to manage redemptions of existing dollar-pegged tokens
13 February 2023 - 16:58
byTom Wilson and Elizabeth Howcroft
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London — New York’s chief financial regulator has ordered Paxos, the company behind the stablecoin of crypto exchange Binance, to stop issuing the token, Paxos and the regulator said in separate statements on Monday.
The Binance USD (BUSD) stablecoin, one of the world’s biggest, is issued and redeemed by New York-based Paxos Trust Company, both of which are regulated by the New York department of financial services.
The token, which is designed to keep a steady value and is widely used by crypto traders at Binance, is backed by reserves of ordinary cash and US treasuries, based on Paxos’s website.
The department said in a statement it ordered Paxos to stop minting BUSD “as a result of several unresolved issues related to Paxos’s oversight of its relationship with Binance through Paxos-issued BUSD”.
The regulator’s statement did not give any details of what those issues were.
Binance CEO Changpeng Zhao wrote in a series of tweets earlier on Monday that the regulator’s decision meant that “BUSD market cap will only decrease over time”, adding that Paxos assured Binance the funds were fully covered by Paxos’s bank reserves.
BUSD is “wholly owned and managed by Paxos”, Zhao said.
Binance USD is the seventh-largest cryptocurrency, with more than $16bn in circulation, according to market tracker CoinGecko. Zhao said Binance would “continue to support BUSD for the foreseeable future” and that he saw users “migrating to other stablecoins over time”.
Paxos said in a statement that it would stop issuing new BUSD on February 21 and would continue to support and redeem pre-existing BUSD until “at least February 2024”.
The department of financial service said it was “monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols”.
The department’s clampdown, first reported by the Wall Street Journal, comes amid a wider crackdown on cryptocurrencies and Binance by US regulators. The justice department is investigating Binance for suspected money laundering and sanctions violations, Reuters has previously reported. Binance has previously said it regularly works with regulatory agencies to address questions they may have.
The WSJ, citing unnamed sources, reported on Sunday that the US Securities and Exchange Commission (SEC) has told Paxos it plans to sue the company, alleging that Binance USD is an unregistered security.
The SEC did not immediately respond to a request for comment.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
New York orders Binance stablecoin backer to stop minting tokens
The company says it will not fight the ruling and will continue to manage redemptions of existing dollar-pegged tokens
London — New York’s chief financial regulator has ordered Paxos, the company behind the stablecoin of crypto exchange Binance, to stop issuing the token, Paxos and the regulator said in separate statements on Monday.
The Binance USD (BUSD) stablecoin, one of the world’s biggest, is issued and redeemed by New York-based Paxos Trust Company, both of which are regulated by the New York department of financial services.
The token, which is designed to keep a steady value and is widely used by crypto traders at Binance, is backed by reserves of ordinary cash and US treasuries, based on Paxos’s website.
The department said in a statement it ordered Paxos to stop minting BUSD “as a result of several unresolved issues related to Paxos’s oversight of its relationship with Binance through Paxos-issued BUSD”.
The regulator’s statement did not give any details of what those issues were.
Binance CEO Changpeng Zhao wrote in a series of tweets earlier on Monday that the regulator’s decision meant that “BUSD market cap will only decrease over time”, adding that Paxos assured Binance the funds were fully covered by Paxos’s bank reserves.
BUSD is “wholly owned and managed by Paxos”, Zhao said.
Binance USD is the seventh-largest cryptocurrency, with more than $16bn in circulation, according to market tracker CoinGecko. Zhao said Binance would “continue to support BUSD for the foreseeable future” and that he saw users “migrating to other stablecoins over time”.
Paxos said in a statement that it would stop issuing new BUSD on February 21 and would continue to support and redeem pre-existing BUSD until “at least February 2024”.
The department of financial service said it was “monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols”.
The department’s clampdown, first reported by the Wall Street Journal, comes amid a wider crackdown on cryptocurrencies and Binance by US regulators. The justice department is investigating Binance for suspected money laundering and sanctions violations, Reuters has previously reported. Binance has previously said it regularly works with regulatory agencies to address questions they may have.
The WSJ, citing unnamed sources, reported on Sunday that the US Securities and Exchange Commission (SEC) has told Paxos it plans to sue the company, alleging that Binance USD is an unregistered security.
The SEC did not immediately respond to a request for comment.
Reuters
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