The United States keeps up its pressure effort on various cryptocurrency users and companies. Paxos and Binance appear to be in the regulatory crosshairs right now after Kraken was the target of the SEC last week and was forced to suspend its staking services.
According to the Wall Street Journal on Sunday, the U.S. Securities and Exchange Commission (SEC) plans to file a lawsuit against Paxos, the company that created the Binance USD (BUSD) and Pax Dollar (USDP) tokens, over stablecoin issuance.
The reports continued to state, as was to be expected, that the SEC claims BUSD is an unregistered security. The announcement was released a few days after rumors surfaced that Paxos was the subject of an investigation by the New York Department of Financial Services (NYDFS).
Paxos Has Been Ordered to Cease Issuing BUSD
However, the New York Department of Financial Services (NYDFS) has now ordered Paxos to stop releasing new BUSD stablecoins.
The announcement caused a great deal of fear in the market, but Changpeng “CZ” Zhao, the CEO of Binance, has moved to reassure customers that their assets are secure despite the expected legal action.
2/ We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS).
Paxos is regulated by NYDFS.
BUSD is a stablecoin wholly owned and managed by Paxos.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
Zhao stated in a Twitter post on Feb. 13 that Paxos is regulated by the NYDFS and that BUSD is “wholly owned and managed by Paxos.” All funds, according to CZ, are “SAFU” on both Binance and Paxos, but the latter will still operate the stablecoin and handle redemptions.
The Binance CEO predicted that as a result of the enforcement action, the BUSD market cap would decline over time and that the exchange would consider stablecoins that were not reliant on the US dollar.
BUSD’s Support Continues on Binance Exchange
Moreover, CZ said that despite users’ potential migration to other stablecoin tokens as a result of the enforcement action, Binance would continue to support the stablecoin on its exchange.
Changpeng Zhao stressed that,
“Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time, and we will make product adjustments accordingly. e.g., move away from using BUSD as the main pair for trading, etc.”
Security charges against a stablecoin—currently the third-largest stablecoin—are expected to be the last thing regulators could ever consider raising. Stablecoins are a well-liked entry point for consumers entering the cryptocurrency space for the first time, so this action might pose a significant threat to the sector.
Moreover, attacking a stablecoin cryptocurrency would be a short-sighted and regressive move by the regulator. In addition to stifling innovation and limiting consumer choice, this measure would also send a message to the rest of the world that the jurisdiction is hostile to new innovations, evolution, and financial freedom.
