Paxos to stop minting BUSD stablecoins for Binance

Blockchain infrastructure platform Paxos Trust Company will halt the issuance of new Binance USD (BUSD) stablecoins amid the ongoing probe by New York regulators.

Paxos officially announced on Feb. 13 that the firm would end its relationship with Binance for the branded U.S. dollar-pegged stablecoin BUSD.

Starting from Feb. 21, Paxos will stop minting new BUSD tokens in accordance with directions and coordination with the New York Department of Financial Services (NYDFS).

Paxos emphasized that all existing BUSD tokens will remain fully backed and redeemable through Paxos Trust Company until “at least February 2024.” Customers will be able to redeem their funds in U.S. dollars and convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollar (USDP), the firm stated, adding:

“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 also noted that Paxos Trust is a regulated institution overseen by the NYDFS and audited by a top-four accounting firm, referring to public transparency reports. The firm will continue to maintain its strong regulatory capital to operate USDP as well as its gold-backed stablecoin Pax Gold (PAXG).

Binance CEO Changpeng Zhao also took to Twitter on Monday to report that the exchange was informed by Paxos that they have been directed to cease new BUSD by NYDFS. The CEO stressed that the stablecoin is issued and managed by Paxos, implying that there are no issues between Binance and regulators.

“As a result, BUSD market cap will only decrease over time,” Zhao noted.

Related: Binance to support BUSD while exploring non-USD stablecoins, CZ says

BUSD is the seventh largest cryptocurrency by market value at the time of writing, with a market capitalization of $16 billion. The token is slightly down from its $1 peg, trading at $0.998, which is not unique for many other reserve-backed stablecoins as their value sometimes fluctuates between $0.9 and $1.2.

The news comes shortly after NYDFS abruptly ordered Paxos Trust to stop the issuance of BUSD on Feb. 13. Previously, the United States Securities and Exchange Commission issued a notice to Paxos, reportedly alleging that BUSD is an unregistered security.