The issuer of the BUSD stablecoin is forced to suspend coin issuance, but it completely denies the SEC’s charges and is ready to prove it in court, if necessary. Binance continues to support BUSD, but users are actively getting rid of the token, increasing the crypto exchange’s net outflow of funds.
Paxos Trust Company, the issuer of Binance USD, confirmed that the company would stop issuing new tokens starting February 21. Existing BUSD will remain fully collateralized, and their repayment through Paxos Trust will be available until at least February 2024.
The other day, rumors started circulating that the New York Department of Financial Services (NYDFS) ordered Paxos to suspend BUSD minting after the SEC expressed suspicions against the issuer of Binance USD.
Paxos reps strongly disagree with the regulator’s actions, confirming that they’ve received a Wells notice from the SEC. The Paxos team denies that BUSD is a security and is prepared “to vigorously litigate” if necessary.
Although Paxos was hit by the SEC, the cryptocurrency exchange Binance seems to be the main target of the regulator. After all, Binance was affected by the regulator’s actions. The net outflow of funds on Binance reached $788 million in the last 24 hours, Nansen reported. This figure is the highest since December, when the FUD effect affected the crypto exchange.
Analysts at PeckShield also recorded a significant drop in BUSD’s supply — by $342 million over the past 24 hours. This indicates that users are actively cashing out the stablecoin due to concerns about further actions taken by the regulator. The project’s cap fell to $15.8 billion, a loss of over 2% overnight.
According to Changpeng Zhao, CEO of Binance, the cryptocurrency exchange will continue to support BUSD despite Paxos’ problems with the U.S. regulators. He doesn’t deny the need for future adjustments to trading pairs in case the exchange has to abandon BUSD altogether. CZ also assured users that the surge in withdrawal activity on the platform in no way affects the solvency of Binance and that “the funds are #SAFU.”
It’s worth noting that the actions of American regulators against BUSD clearly have a definite purpose. Namely, Binance. It became known that Circle Internet Financial Ltd. filed a complaint with the NYDFS against the exchange regarding its reserves back in the fall of 2022. Circle’s primary concern was specifically about Binance’s ability to provide support for its token. However, the regulator’s worries in this matter were focused more on the crypto exchange’s reserves in BUSD.
Binance is the biggest holder of BUSD. The company has about 14.4 billion tokens in its accounts, which is about 90% of the current market cap of BUSD. In total, Binance has 34% of its reserves in BUSD.
