The New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing its dollar-backed cryptocurrency. The regulator also told Paxos that it needs to put $1 million in a bank account as a surety bond. Binance’s stablecoin, BUSD, was issued by Paxos and supported by the company’s stablecoin trust company. Since it is a stablecoin, it cannot be traded on exchanges outside of Paxos and Binance. Binance Coin (BNB), which is the primary trading currency on the exchange and widely used across the crypto community, dropped sharply on Thursday morning following the announcement from NYDFS.”
Binance’s stablecoin is being stopped by regulators
Paxos has been ordered by regulators to stop issuing its dollar-backed cryptocurrency. The New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing its dollar-backed cryptocurrency, according to a report from Reuters. The announcement comes just days after Binance’s own stablecoin was hit with similar news from authorities in Hong Kong.
The New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing its dollar-backed cryptocurrency. Paxos is a company that issues stablecoins, which are cryptocurrencies that are pegged to the value of fiat currency such as the US dollar or euro. Stablecoins are often seen as a way for crypto investors to hedge against volatility in the market and avoid losing money on their investments if prices drop sharply. The Securities and Exchange Commission plans to sue Paxos for violating investor protection laws, alleging that BUSD is an unregistered security, according to a report by Wall Street Journal.
The announcement follows an investigation into whether Paxos had complied with all applicable laws when issuing its stablecoins, which included obtaining approval from regulators like NYDFS before launching them in early 2019. The regulator said it found “deficiencies” in how Paxos managed customer funds during this period and ordered them not only to halt further issuance but also return $65 million worth of deposits made by accredited investors during this time frame
The regulator also told Paxos that it needs to put $1 million in a bank account as a surety bond. Paxos’s stablecoin is called BUSD and is currently trading at $0.99 cents, dropping below the $1.00 stablecoin assurance. The cryptocurrency has been around since January 2019 when it was listed on the Gemini exchange, which is owned by Cameron and Tyler Winklevoss (of Facebook fame).
BNB is the primary trading currency on Binance, which currently has the highest volume in terms of trades. It’s also widely used across the crypto community and one of only two stablecoins available for use on its platform.
Who is Paxos?
Paxos is a blockchain and fintech company that was founded in 2012 by Charles Cascarilla and Richmond Teo and offers a wide range of services including digital asset custody, trading, and settlement, as well as issuing stablecoins such as Paxos Standard (PAX) and BUSD. The company started as a Bitcoin exchange, but later pivoted to focus on enterprise blockchain solutions. The company is known for its regulatory compliance and partnerships with traditional financial institutions. Paxos is a regulated financial institution, and has obtained a number of licenses from financial authorities such as the New York State Department of Financial Services (NYDFS). In addition to PAX, Paxos also issues stablecoins pegged to other currencies such as the Euro and the Swiss Franc. In 2021, Paxos announced that it had raised $300 million in a Series D funding round, which valued the company at $2.4 billion.
We are not sure why regulators decided to stop Paxos from issuing its stablecoin but it could be related to concerns over price manipulation. The NYDFS also ordered Paxos to put $1 million in a bank account as a surety bond, which means that if the company fails to comply with any of these requirements then they will lose the money. This is another reason why Binance Coin dropped sharply today following this announcement from NYDFS