Blockchain infrastructure platform Paxos Trust Company will stop issuing new Binance Dollar (BUSD) stablecoins amid an ongoing investigation by New York regulators.
Paxos officially announced on Feb. 13 that it would be terminating its relationship with Binance over its branded U.S. dollar-pegged stablecoin BUSD. Beginning February 21, Paxos will cease minting new BUSD tokens in accordance with the direction and coordination of the New York Department of Financial Services (NYDFS).
Paxos emphasized that all existing BUSD tokens will be fully backed and redeemed through the Paxos Trust Company until “at least February 2024.” Clients will be able to redeem their funds in U.S. dollars and convert their BUSD tokens into Pax Dollar (USDP), another Paxos-issued stablecoin, the firm said, adding:
“This action does not impact our ability to continue serving new or existing customers, our continued dedication to grow our staff or fund our business objectives. Paxos remains committed to becoming the global leader in the blockchain tokenization infrastructure”
Paxos also noted that the Paxos Trust, a regulated organization regulated by NYDFS and audited by a Big Four accounting firm, referenced the Public Transparency Report. The company will continue to maintain its strong regulatory capital to operate USDP and its gold-backed stablecoin, Pax Gold (PAXG). Binance CEO Changpeng Zhao also reported on Twitter on Monday that Paxos notified exchanges that NYDFS had directed them to stop new BUSD. The CEO emphasized that the stablecoin is issued and managed by Paxos, which means there are no issues between Binance and regulators.
“Therefore, the BUSD market cap will only decrease over time,” Zhao noted.
At the time of writing, BUSD is the seventh-largest cryptocurrency by market capitalization with a market capitalization of $16 billion. Just below its $1 peg, the token is trading at $0.998, which is not unique to many other reserve-backed stablecoins as their value sometimes fluctuates between $0.9 and $1.2. The news comes shortly after the NYDFS abruptly ordered the Paxos Trust to cease issuing BUSD on Feb. 13. Previously, the SEC issued a notice to Paxos allegedly claiming that BUSD was an unregistered security.
