BUSD is dead, long live USDT
Paxos has announced that from February 21, it will no longer issue new Binance USD (BUSD) tokens.
Binance USD is a dollar-pegged stablecoin issued by Paxos that carried the Binance brand name. Protos previously reported on the work of Jonathan Reiter which showed that Binance Peg BUSD, a token pegged to BUSD issued by Binance, hadn’t always been appropriately backed.
Binance’s stablecoin BUSD hasn’t always been 1:1 backed, report
The order to stop minting new tokens comes from the New York Department of Financial Services (NYDFS), according to a statement posted by the regulator. The statement also explicitly draws attention to the fact that it had authorized Paxos to issue BUSD on Ethereum, but hadn’t authorized Binance Peg BUSD.
This comes several days after CoinDesk reported that Paxos was under investigation by NYDFS.
Paxos in its press release notes that it doesn’t expect that this will affect its Paxos Dollar (USDP), Pax Gold (PAXG), or other lines of business.
On Sunday the Wall Street Journal (WSJ) reported that Paxos has also received a Wells Notice from the Securities and Exchange Commission (SEC), detailing the SEC’s intention to sue the company alleging that BUSD is an unregistered security.
SEC chair Gary Gensler has previously communicated his belief that stablecoins may be securities, specifically pointing out that even if it doesn’t fail the Howey Test, it can still be a security under legislation passed by Congress.
#BUSD. A thread. 1/8
In summary, BUSD is issued and redeemed by Paxos. And funds are #SAFU!
— CZ 🔶 Binance (@cz_binance) February 13, 2023
Read more: Binance’s stablecoin BUSD hasn’t always been 1:1 backed, report
Changpeng Zhao, CEO of Binance, noted that “funds are SAFU” and that they’ll need to move away from BUSD as the primary pair for trading.
Several months ago, Binance announced that it automatically converted user deposits of other stablecoins into BUSD.
It’s not yet clear if these regulatory interventions will extend to other stablecoins. The largest stablecoin, Tether (USDT), is banned from operating in New York following its previous settlement with the New York Attorney General.
The largest stablecoin, Tether, is already banned from operating in New York following its previous settlement with the New York Attorney General. A previous Protos FOIA request to the SEC requesting documents on Tether was returned with an exemption citing documents compiled for law enforcement efforts.
Recent regulatory statements from banking regulators have suggested that banks need to be very cautious engaging with cryptocurrency.”