New York regulators have reportedly ordered Paxos to stop issuing Binance’s BUSD stablecoin, according to a report in the Wall Street Journal. The cryptocurrency features prominently in the cryptocurrency giant’s reserves, so the announcement could have particularly severe consequences for the sector.
Paxos told to stop issuing Binance BUSD
The news was first reported by the Wall Street Journal, which said that the firm Paxos will no longer be able to issue the Binance BUSD, following a request from New York regulators. This means that the issuance of new tokens is now blocked. According to Binance, users will still be able to exchange their BUSD for dollars.
A Binance spokesperson confirmed the information to The Block:
Paxos has informed us that they have been ordered to stop minting new BUSDs. […] As a result, the capitalization of the BUSD will be gradually reduced. “
It was already known that the US Securities and Exchange Commission (SEC) was planning a legal initiative against Paxos, but the decision is sudden, and unexpected for the ecosystem.
The BUSD powers part of the Binance machine
The BUSD is currently the third largest stablecoin in the market, with a capitalization of over $16 billion. Another concern is that the BUSD represents a significant portion of Binance’s reserves. Last November, the company confirmed that the BUSD accounted for $21 billion of its $71 billion in reserves.
If the BUSD falls, a significant part of the Binance empire is at risk. Faced with this, Changpeng Zhao, the company’s CEO, was his usual reassuring self, inviting users to ignore the “FUD”:
– CZ Binance (@cz_binance) February 13, 2023
Still, this is a particularly targeted blow to Binance by the SEC. We will have to watch the consequences in the hours and days to come, given the company’s prominent place in the ecosystem
