New York regulator explains Paxos decision

The infrastructure company and issuer of stablecoins Paxos failed to ensure the safety of BUSD, which could have enabled illicit activity. Reuters reported this to the New York Department of Financial Services (NYDFS).

“[Paxos] violated its obligation to conduct periodic risk assessments and updates to the due diligence of Binance customers and Paxos-issued BUSD to prevent the platform from being used by bad actors,” the NYDFS said.

On February 10, it was revealed that the regulator initiated an investigation into the company.

Subsequently, the NYDFS ordered Paxos to stop issuing BUSD. Its representatives confirmed that they are ending their cooperation with Binance regarding the stablecoin, and from February 21 will halt the minting of new coins. At the same time, the firm will continue to support buybacks and conversions at least until February 2024.

1/ This morning, Paxos announced it will halt minting new #BUSD tokens effective February 21. Read the full press release from Paxos here: https://t.co/jXZY1ak8DR

— Paxos (@PaxosGlobal) February 13, 2023

Earlier, The Wall Street Journal reported that the U.S. Securities and Exchange Commission plans to sue Paxos for its role in issuing BUSD.

Against this backdrop the price of Binance’s BNB token fell. As of writing, the asset was trading above $280, having lost 11.3% in the last 24 hours (CoinGecko). Binance founder Changpeng Zhao said that Paxos operates the stablecoin independently.

Paxos is the issuer of BUSD and USDP, and also стоит за токеном Pax Gold with a total market value of $488.7 million. The asset is backed by physical gold.

PayPal paused work on its own stablecoin amid news of the Paxos investigation.