Paxos ordered to stop mining Binance stablecoin by New York regulator

Chad Cascarilla, CEO of Paxos.

Adam Jeffery | cnbc

Crypto firm Paxos will stop issuing new Binance USD (Bus) stablecoin under the direction of Changpeng Zhao, founder of Binance, a New York state financial regulator said on Monday. Paxos’ own stablecoin was not affected.

New York State Department of Financial Services issued Order “As a result of a number of unresolved issues related to Paxos’ oversight of its relationship with Binance,” the regulator said in a consumer alert on Monday.

“We were informed by Paxos that they have been instructed by the New York Department of Financial Services to stop manufacturing new BSDs,” Zhao said on Twitter. BUSD is Binance’s dollar-pegged stablecoin, with each BUSD having a fiat value of one dollar, and is used to trade cryptocurrencies including Ether and Bitcoin on Binance.

“Effective February 21st, Paxos will stop issuing new BUSD tokens and will work closely with the New York Department of Financial Services,” Paxos said in a statement. Stablecoin Bus.”

Binance did not immediately respond to requests for comment.

Paxos’ BUSD product is built on the Ethereum blockchain and backed one-to-one by the US Treasury and Treasury reverse repurchase agreements, or repos, Paxos reported holding some $16 billion as of January 31. Paxos’ BUSD product is related to, but separate from, Binance’s self-issued Binance-pegged BUSD.

Binance’s self-issued BUSD, which is not directly regulated by NYDFS, is independently wrapped and issued by the crypto exchange on the Ethereum Beyond blockchain. In other words, Binance can take a Paxos-issued BUSD, creating an identical BUSD on another blockchain (such as Binance’s). own blockchainFor example), and freeze the BUSD issued by the respective Paxos.

“The department has not authorized Binance-Peg BUSD on any blockchain, and Binance-Peg BUSD has not been issued by Paxos,” NYDFS said.

The move is the latest in a growing regulatory effort to rein in the once free-wheeling crypto industry. Last week, the Securities and Exchange Commission Crypto exchange settled with Kraken On allegations of unregistered offers and sales in connection with Kraken’s crypto staking platform.

“This action does not affect our ability to continue serving new or existing customers, grow our workforce or our continued dedication to meeting our business objectives,” Paxos’ statement said.

In 2014, New York became the first state to establish a license for crypto-related companies. Paxos is one of more than two dozen companies that have received a BitLicense. In January, the NYDFS action taken against any other regulated company, coinbase,

Two other New York-state regulated entities, Genesis Global Trading and crypto exchange Gemini, Is charged by the Securities and Exchange Commission for engaging in an unregistered offering and sale of securities in connection with a joint crypto lending program.

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