The New York Department of Financial Services (NYDFS) has ordered the cryptocurrency infrastructure company Paxos to stop issuing the stablecoin Binance USD (BUSD).
Paxos will continue to service the product, manage redemptions and provide additional information as needed.
The US Securities and Exchange Commission (SEC) also plans to sue Paxos over BUSD, claiming that the stablecoin is an unregistered security. The SEC sent Paxos a letter informing them of “possible enforcement actions”. The lawsuit has been filed for “violating investor protection laws”.
Paxos was previously engaged in the issuance of BUSD, which is backed by real assets. It is currently reported that customer funds (BUSD collateral) are secure and fully covered by reserves in their banks. However, it is unclear what will happen in the future.
This is a very serious event for a number of reasons:
- BUSD is the third-largest stablecoin by market capitalization (around $16 billion)
- It provides a significant part of Binance’s profits, around $300 billion a year, even though it is a stablecoin and Binance has been earning from it in both bullish and bearish markets, due to investors’ desire to preserve funds. It is not yet clear how much this will affect Binance’s business.
- If the hands of the US executive branch reach such giants, any restrictions on the crypto market can be expected.
- The reaction of BNB alone already says a lot, as seen on the chart above.
NASDAQ fund quotes are now rising, the dollar index and S&P are at Friday’s levels, but BNB (-6.8%), TWT (-5.9%), ETH (-2.2%), BTC (-0.93%) are all in the red zone. The entire crypto market is in the red zone and this event has far-reaching consequences.
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