Chad Cascarilla, CEO of Paxos.
Adam Jeffery | CNBC
Cryptocurrency firm Paxos will cease issuing new Binance USD, or BUSD, stablecoins under the direction of New York state’s financial regulator, Binance founder Changpeng Zhao said Monday. Paxos’ own stablecoin was not impacted.
The New York State Department of Financial Services issued the order “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance,” the regulator said Monday in a consumer alert.
“We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services,” Zhao said on Twitter. BUSD is Binance’s dollar-pegged stablecoin, with each BUSD hypothetically valued at one dollar, and it is used on Binance to trade cryptocurrencies, including ether and bitcoin.
“Effective February 21, Paxos will cease issuance of new BUSD tokens as directed by and working in close coordination with the New York Department of Financial Services,” Paxos said in a statement, adding that it would “end its relationship with Binance for the branded stablecoin BUSD.”
Binance did not immediately respond to requests for comment.
Paxos’ BUSD product is built on the Ethereum blockchain and backed one-to-one by U.S. Treasurys and Treasury Reverse Repurchase Agreements, or repos, with Paxos reporting some $16 billion in holdings as of Jan. 31. Paxos’ BUSD product is related to, but separate from, Binance’s self-issued Binance-pegged BUSD.
Binance’s self-issued BUSD, which is not directly regulated by NYDFS, is independently wrapped and issued by the crypto exchange on blockchains beyond Ethereum. In other words, Binance can take a single Paxos-issued BUSD, create an analogous BUSD on another blockchain (like Binance’s own blockchain, for example), and freeze a corresponding Paxos-issued BUSD.
“The Department has not authorized Binance-Peg BUSD on any blockchain, and Binance-Peg BUSD is not issued by Paxos,” NYDFS said.
The move is the latest in…
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