A recent review of Paxos and its Binance USD, The token is not a direct attack on the stablecoin itself.
In a Feb. 14 analysis, Matrixport’s Markus Thielen suggested that BUSD issuer Paxos Trust Company may not be overseeing the token strictly enough. The issue itself "doesn't seem to be about stablecoins," he added.
“Paxos violated its obligation to conduct tailored periodic risk assessments and due diligence on clients of Binance and Paxos-issued BUSD,” Thielen argued.
On Feb. 13, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD “due to several unresolved issues related to Paxos’ oversight of its relationship with Binance.” Paxos also recently confirmed that on Feb. 3, the U.S. Securities and Exchange Commission (SEC) issued a Wells notice to stablecoin issuers for failing to register their offerings under federal securities laws.
Thielen noted that BUSD has issued $11 billion on Ethereum, but there are also $4.8 billion in Binance-Peg BUSD tokens on the BNB Smart Chain. Binance provides anchor token services, BUSD is locked on Ethereum, and Binance-Peg BUSD is issued on BNB Chain and other blockchains such as Avalanche and Polygon.
However, Paxos recently stated on February 13th that “the Paxos Trust-issued BUSD tokens are and will always be backed 1:1 by USD-denominated reserves, fully segregated and held in bankruptcy remote accounts.” In a statement to Cointelegraph, Binance reiterated this stance, saying that “BUSD is a 1:1 backed stablecoin and one of the most transparent stablecoins in existence.”
The Jan. 24 incident in which Binance mixed customer funds with collateral may also have sparked some regulatory action, Thielen noted. The recent action against BUSD still has some thinking that other stablecoins could be in trouble.
Paxos recently stated that there are “clearly no other allegations against Paxos” other than the current issues surrounding BUSD. At the same time, the U.S. dollar central bank of the united states Dante Disparte, chief strategy officer and head of global policy at issuer Circle, told: “Circle maintains that USDC is a regulated dollar digital currency issued as stored value under U.S. money transmission law.”
