By Michael Scott
Stablecoin issuer Paxos confessed the decision to halt fresh minting of fresh Binance USD (BUD) citing the directive issued by the Department of Financial Services in New York (NYDFS).
Unlike the suit that the federal watchdog alleges the sale of an unregistered security, the scope of NYDFS investigations remains uncertain.
Paxos Considering Suspending New BUSD Issuance
The revelation that Paxos was mulling suspending new BUSD issuance comes after the US Securities and Exchange Commission (SEC) served it with a Wells Notice. The legal brief captures the SEC’s intentions of suing Paxos for allegedly selling BUSD despite being unregistered security.
The reports of the SEC initiating charges against Paxos came days after CoinDesk’s article indicated that NYDFS was probing the stablecoin BUSD issuer. BUSD involves a Binance-branded stablecoin issued by Paxos that also runs the Pax dollar (USDP).
Binance Reviewing Stablecoin Projects
News of the SEC initiating legal action against Paxos prompted Binance’s statement. The lead crypto exchange confirmed reviewing various projects hosted within markets identified with regulatory uncertainty.
Binance regretted that the continued absence of regulatory clarity translated to detriments borne by the users. The statement assured its community that Binance would prioritize reviewing jurisdictions lacking regulatory clarity to insulate users from bearing undue harm.
Paxos Capacity to Honor Orderly Redemptions Questioned
NYDFS statement declared close monitoring of Paxos to ascertain its capacity to honor orderly redemptions. NYDFS added that such redemptions would rely upon risk-based and enhanced compliance protocols.
An update issued by Paxos Trust early on Monday reassured the community that it backs the BUSD in matched dollar-denominated reserves. Besides fully segregating the reserves, Paxos reassured users that are remotely held in banks.
Massive Remittances of BUSD Dominate Crypto Exchanges
Paxos reassurance is not deterring users from divorcing BUSD. In particular, over $52 million of the stablecoin was remitted to various exchanges within the past 24-hour period.
The spike in activity is observed by CryptoQuant’s assessment of transactions as the growing desire by the BUSD holders to convert them into fiat.
BNB Chain’s suffered a similar fate with the native token declining by 7% in a day. The downtrend triggered massive remittances of BUSD into the crypto exchanges.
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