Stablecoin issuer Paxos Trust Company will be halting the issuance of new Binance USD (BUSD) stablecoins at the direction of the New York Department of Financial Services (NYDFS), the company said in a press release on 13 February.
According to the announcement, Paxos will cease the issuance of the U.S. dollar-pegged stablecoin and end its relationship with Binance for the token on 21 February to comply with an order from the NYDFS. The company noted that all existing BUSD will remain fully backed, and holders will have the choice of redeeming their funds in USD or converting their BUSD to Pax Dollar (USDP) until at least February next year. Paxos noted in its press release:
“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 relied upon by global enterprises as they transition towards faster, safer, fairer and more efficient financial systems.”
In a consumer notice, the NYDFS explained it had ordered the company to halt minting BUSD due to “several unresolved issues” related to Paxos’ oversight of its relationship with Binance in regards to the stablecoin. The regulator also noted it will closely monitor the stablecoin issuer to verify that it can “facilitate redemptions in an orderly fashion subject to enhanced, risk-based, compliance protocols.”
Binance CEO Changpeng “CZ” Zhao took to Twitter to clarify that the BUSD stablecoin was issued, managed, and “wholly owned” by Paxos, and that the move will result in BUSD’s market cap decreasing over time. He also noted that Binance will continue to support BUSD “for the foreseeable future”, but the exchange will be making product adjustments accordingly, such as moving away from using BUSD as the main pair for trading.