Finance

Chief NY Regulator Orders Halt of Binance Stablecoin

FEB 13 2023·Updated FEB 14 2023

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The Facts

The New York Department of Financial Services (NYDFS) — NY’s chief financial regulator — has ordered the firm behind Binance's stablecoin to stop issuing the token after finding it could not do so in a "safe" manner.
Reuters
Paxos — which issues Binance Stablecoin (BUSD) — has announced it will cease minting new BUSD tokens as of Feb. 21, after the NYDFS released an investor alert citing concerns “related to Paxos’ oversight of its relationship with Binance.”
Finance
Paxos’ BUSD product is built on the Ethereum blockchain and backed one-to-one by US Treasuries and Treasury Reverse Repurchase Agreements. The Paxos BUSD product is related to, but separate from, Binance’s self-issued Binance-pegged BUSD.
CNBC
Binance’s self-issued BUSD is not regulated by the NYDFS and will not be affected by the intervention. Paxos’ own stablecoin was also not impacted.
CNBC
With $16B in circulation, BUSD is crypto’s third largest stablecoin and is an important cog in both Changpeng Zhao’s (CZ's) Binance ecosystem and the broader crypto sector. Following the news, Binance Coin was down 8.9% on Monday.
Yahoo! News
Binance has been under investigation since 2018 to monitor its compliance with US anti-money laundering rules. Regulators are ramping up their focus on cryptocurrency firms as the SEC is planning a lawsuit against Paxos for violating investor protection laws.
Investopedia

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

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ESTAB

The Spin

Narrative A

Through its administration of the Binance stablecoin, Paxos failed to fulfill its obligation to conduct tailored, periodic risk assessments, leaving the token vulnerable to bad actors. There have been numerous problems with the way Paxos administered BUSD which is why it must stop issuing the stablecoin.

CoinDesk

Narrative B

Paxos prioritizes the safety of its customers' assets above all and has already agreed to comply with the NYDFS regulation. Despite questions about its handling of the tokens, all Paxos-issued BUSD tokens are backed 1:1 with US dollar-denominated reserves.