Cryptocurrency exchange Binance plans to continue supporting its Binance USD (BUSD) stablecoin despite its issuer, Paxos Trust Company, facing a stop order from American regulators.
As reported by Cointelegraph, the New York Department of Financial Services (NYDFS) has ordered blockchain firm Paxos to cease issuing dollar-pegged stablecoin BUSD. Paxos has also received a wells notice from the United States Securities and Exchange Commission (SEC) alleging that BUSD is an unregistered security.
Binance CEO Changpeng “CZ” Zhao has moved to assure users that funds are safe despite the intended enforcement action. In a Twitter thread on Feb. 13, Zhao noted Paxos is regulated by the NYDFS, and BUSD is “wholly owned and managed by Paxos.“
#BUSD. A thread. 1/8
In summary, BUSD is issued and redeemed by Paxos. And funds are #SAFU!
— CZ Binance (@cz_binance) February 13, 2023
According to Zhao, Paxos will continue to service BUSD and manage redemptions. It also made assurances of its reserves, which have been audited by multiple parties. As a result of the enforcement action, the Binance CEO said that the BUSD market cap would decrease over time, and the exchange would explore non-U.S. dollar-based stablecoins.
Zhao also said that Binance would continue to support the stablecoin on its exchange while acknowledging that users may migrate to other stablecoin tokens due to the enforcement action.
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This will also see Binance consider “product adjustments,” with a move away from using BUSD as its main trading pair for numerous tokens available across the exchange. Binance’s CEO also cautioned that the actions taken by the SEC and NYDFS could have a significant impact on the ongoing development of the cryptocurrency ecosystem:
““IF” BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such.”
Zhao also noted that ongoing regulatory uncertainty in certain markets would necessitate reviews of other projects in given jurisdictions “to ensure our users are insulated from any undue harm.“
American regulators have had a number of cryptocurrency service providers and tokens in their crosshairs in recent years. Ripple is still in an ongoing legal battle with the SEC over claims that XRP (XRP) is an unregistered security.
Meanwhile, the cryptocurrency exchange Kraken agreed to cease its staking services to U.S. clients in Feb. 2023, paying $30 million in disgorgement, prejudgment interest and civil penalties to the SEC. The regulator charged Kraken with failing to register its crypto asset staking-as-a-service program.