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Paxos Ordered to Halt Issuance of Binance USD Stablecoin

Posted on 14. February 2023

• The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos Trust to stop the issuance of dollar-pegged Binance USD stablecoin.
• The United States Securities and Exchange Commission (SEC) issued a wells notice to Paxos, alleging that Binance USD is an unregistered security.
• The NYDFS has asked Paxos to stop creating more of its BUSD token and monitor redemptions in an orderly fashion subject to enhanced, risk-based compliance protocols.

New York Regulator Orders Paxos To Stop Issuing Stablecoin

The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos Trust to cease the issuance of dollar-pegged Binance USD stablecoin. This comes after the United States Securities and Exchange Commission (SEC) issued a wells notice to Paxos, alleging that Binance USD is an unregistered security.

Paxos Must Stop Creating More Of Its Stablecoin

The NYDFS has asked Paxos to stop creating more of its BUSD token. They will continue to manage redemptions of the product, however they must do so in an orderly fashion subject to enhanced, risk-based compliance protocols.

SEC’s Notice Alleges Unregistered Security

The United States Securities and Exchange Commission alleged that Binance USD is an unregistered security when it issued a Wells Notice to Paxos Trust Company LLC earlier this year. This Wells Notice was meant as a warning letter from the SEC prior any enforcement action against them for their activities related to the offering of securities without registration or qualification with the SEC.

Kraken Forced To Close Staking Offering

This regulatory scrutiny around crypto markets comes shortly after Kraken was forced to close its staking offering due the SEC’s declaration that crypto staking services violate securities law only last week. Coinbase is taking up this fight claiming its staking products are not securities and are instead commodity contracts under US law.

Conclusion

It appears that regulators are now taking further steps towards regulating crypto markets in order protect investors interests while also allowing innovation within these markets at the same time. It remains unclear what other regulations may be imposed moving forward but it seems certain that more regulation is on its way for crypto markets within the near future.

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