In 2022, Circle filed a complaint with the New York State Department of Financial Services (NYDFS) regarding the quality of reserve management for the Binance USD stablecoin (BUSD). Bloomberg reports.
The issuer of the competing asset USDC pointed to allegedly insufficient backing for BUSD.
Earlier, such a deficiency noted by ChainArgos founder Jonathan Reiter.
In February, NYDFS initiated an investigation into the BUSD issuer—the infrastructure company Paxos.
By order of the regulator, the firm will stop issuing the “stablecoin” from February 21. According to CoinGecko, the stablecoin has a market capitalization of $15.7 billion. On this metric, BUSD trails only USDT from Tether ($68.4 billion) and USDC from Circle ($41 billion).
According to The Wall Street Journal, the SEC intends to sue Paxos for issuing unregistered securities in the form of a stablecoin.
“If BUSD is considered a security, it goes without saying that other fully backed stablecoins, including Circle’s USDC, will receive a similar status,” said Prometheum co-CEO Aaron Kaplan to The Block.
According to Banxa CEO Richard Miko, USDC could become the regulator’s next target. However the expert believes Paxos and Circle have good chances of winning in court against the SEC.
The Commission named cryptocurrency regulation one of its priorities for 2023.