Paxos will no longer issue Binance USD stablecoin

The New York Department of Financial Services (NYDFS) ordered crypto infrastructure firm Paxos to stop issuing the stablecoin Binance USD (BUSD), a Binance spokesperson told The Block.

“Paxos has informed us that they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS),” they said. “BUSD is a stablecoin wholly owned and managed by Paxos. As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required.”

The Wall Street Journal first reported the news. The move comes after CoinDesk reported on Friday that the NYDFS is investigating Paxos. Paxos did not immediately respond to The Block’s request for comment.

The U.S. Securities and Exchange Commission is also reportedly planning to sue Paxos over BUSD, alleging that the stablecoin is an unregistered security, the WSJ reported on Sunday. The SEC sent Paxos a letter informing it of “a possible enforcement action,” per the report, citing anonymous sources. The suit is reportedly for “violating investor protection laws.”

BUSD is a stablecoin pegged to the U.S. dollar. It was launched in 2019 by Binance and Paxos. BUSD is the third largest stablecoin in the market with a total supply of over $16 billion.

Binance’s spokesperson said “Paxos also assured the funds are safe, and fully covered by reserves in their banks.”

“Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm,” they added.

Larry Cermak, VP of Research at The Block, said, “BUSD is quite important for Binance in terms of revenue as well. Based on my estimation, Binance currently generated roughly $300 million a year from the revenue share alone. And that revenue is great and stable in bear markets.”

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