Crypto firm Paxos ordered to stop minting Binance USD

A statement released on Paxos’s website said it would cease issuance of the BUSD token form February 21, under guidance from the New York Department of Financial Services (NYDFS)

Crypto firm Paxos has been ordered to stop Binance’s dollar-pegged coin issuance, amid a broader regulatory crackdown that comes after a reported lawsuit by the US Securities and Exchange Commission (SEC).

According to a statement released on Paxos’s website, it would halt issuance of the BUSD token from February 21, under guidance from the New York Department of Financial Services (NYDFS).

The Wall Street Journal reported on Sunday that Paxos was facing a lawsuit from the Securities and Exchange Commission for the BUSD offering, which the regulator said was an unregistered security.

Paxos and Binance entered into a partnership to launch BUSD in 2019. The Binance-branded stablecoin is pegged to the dollar on a one-to-one ratio.

In a statement to Insider, a Binance spokesperson confirmed Paxos had been ordered to halt minting the coin by the New York Department of Financial Services. It said Paxos wholly owned and managed the stablecoin, and as a result the coin’s market cap would only drop over time.

Due to the ongoing regulatory uncertainty in some markets, we will be reviewing other projects in those jurisdictions to make sure our users are insulated from further undue harm, the spokesperson said.

BUSD is the world’s third biggest stablecoin behind Tether and USD coin, with a market cap of over $16 billion as of Monday, as per CoinMarketCap. The cost of BUSD was 0.19 per cent lower early on Monday after the news of a crackdown.

Regulators’ grip on the crypto market is tightening following the collapse of crypto exchange FTX. It has already sued Genesis and Gemini for the offer and sale of unregistered securities connected to their collective Gemini Earn program, which tumbled after FTX collapsed.

Last week, crypto exchange Kraken agreed to end is ‘staking’ program, which offered rewards if investors locked in their holding of certain digital assets, agreeing to pay a $30 million in a settlement to the Securities and Exchange Commission in the process.