In light of the current investigation by New York regulators, blockchain infrastructure platform Paxos will suspend the issue of new BUSD (BUSD) stablecoins. In addition, Paxos formally announced on February 13 that it would cease its partnership with Binance for the branded USD-pegged stablecoin BUSD.
Here is the good news; Changpeng Zhao is not one to sit down and fold in terror. Soon after today’s morning incident, CZ and the Binance team devised a solution. Despite the fact that its issuer Paxos is facing a stop order from American regulators, crypto exchange Binance intends to continue supporting its BUSD stablecoin.
Paxos halts minting BUSD
Paxos will cease minting new BUSD tokens on February 21, in compliance with instructions and agreement with the New York Department of Financial Services (NYDFS).
Paxos stressed that all existing BUSD tokens will be fully backed and redeemable through Paxos Trust Company until “at least February 2024.” After that, customers will be able to redeem their assets in USD and convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollar (USDP), according to the company.
This action does not impact our ability to continue serving new or existing customers, our continued dedication to grow our staff, or fund our business objectives. Paxos remains committed to becoming the global leader in the blockchain tokenization infrastructure […].Paxos
Referring to public transparency reports, Paxos stated that Paxos Trust is a regulated organization supervised by the NYDFS and audited by a top-four accounting firm. In addition, the company will continue to retain its regulatory capital in order to run USDP and its gold-backed stablecoin Pax Gold (PAXG).
Binance’s CEO, CZ, reacts to SEC’s most recent actions
As news unfolds on this developing story, Binance CEO Changpeng ‘CZ’ Zhao has attempted to reassure users that their funds are safe, despite the planned legal action. According to a Twitter thread on February 13, Paxos is regulated by the NYDFS, and BUSD is ‘wholly owned and controlled by Paxos.’
According to Zhao, Paxos will continue to service BUSD and manage redemptions and has provided assurances about its reserves, which several parties have audited. As a result of the enforcement action, the Binance CEO stated that the BUSD market cap would fall over time, and the exchange would investigate non-USD-based stablecoins.
Zhao also stated that Binance would continue to support the stablecoin on its exchange while noting that as a result of the enforcement action, users may migrate to other stablecoin tokens.
Binance will also examine ‘product modifications,’ such as moving away from utilizing BUSD as its primary trading pair for the various tokens accessible on the market. Binance’s CEO also warned that the SEC and NYDFS actions could have a significant impact on the ongoing development of the cryptocurrency ecosystem.
Zhao also stated that ongoing regulatory uncertainty in certain markets will necessitate reviews of other projects in those jurisdictions ‘to ensure our users are insulated from any undue harm.’
The crypto community is in a state of shock over SEC vs. Paxos
As Paxos faces regulatory scrutiny on multiple fronts, crypto community members flocked to Twitter to share their perspectives. From dismissing the problem as “FUD” to labeling it an attack on the Binance exchange, crypto community participants offered a variety of explanations for the charges that BUSD is an unregistered security.
The latest development perplexed the pseudonymous trader Tree of Alpha. The community member questioned how it was classified as a security and asked their followers if they were purchasing BUSD with the prospect of it rising to $2. The trader also blasted SEC Chairman Gary Gensler, claiming that the government official is on an “unhinged, unchecked crusade against crypto.”
Meanwhile, iTrader AshWSB reacted to the situation, dismissing it as “FUD.” The trader contended that BUSD is completely supported and that Paxos not issuing any new tokens will have no effect on the existing tokens. “It’s important to stay informed, but don’t make emotional decisions,” they cautioned.
Tedtalksmacro, a Bitcoin analyst, said that BUSD might not fit the threshold for a security. According to the expert, the event could simply be “a shot at Binance.”