The blockchain company Paxos has been ordered to stop producing the BUSD stablecoin, which is tied to the dollar, by the New York Department of Financial Services (NYDFS). A wells notice stating that BUSD is an unregistered security was also delivered to Paxos by the US Securities and Exchange Commission (SEC).
Despite the anticipated regulatory action, Changpeng "CZ" Zhao, CEO of Binance, has made an attempt to reassure users that their funds are safe. In a thread on Twitter on February 13, Zhao claimed that BUSD is "wholly owned and controlled by Paxos" and that Paxos is subject to NYDFS regulation.
#BUSD. A thread. 1/8
— CZ 🔶 Binance (@cz_binance) February 13, 2023
In summary, BUSD is issued and redeemed by Paxos. And funds are #SAFU!
Zhao asserts that Paxos will continue managing redemptions and servicing BUSD. Additionally, it offered assurances in relation to its reserves, which were reviewed independently. The enforcement move, according to the CEO of Binance, will cause the BUSD market cap to decrease over time. The exchange will also look at stablecoins that are independent of the US currency.
Zhao stated that Binance would continue to support the stablecoin on its platform despite acknowledging that users might migrate to rival stablecoin tokens as a result of the enforcement action.
BUSD is the Many Tokens' Main Trading Partner
The CEO of Binance also issued a warning that the SEC's and the NYDFS's actions may have a significant impact on how the cryptocurrency ecosystem continues to grow: "Binance will also take this into consideration when making "product modifications" with a shift away from using BUSD as its primary trading pair for the many tokens available throughout the exchange:
“"IF” BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such.”
Evaluations of other projects in some countries would be necessary due to ongoing regulatory uncertainty in certain places, Zhao added, in order to "ensure our clients are sheltered from any disproportionate harm."
American authorities have recently targeted several bitcoin service providers and tokens. A legal dispute between the SEC and Ripple continues over claims that XRP is an unregistered security.
The SEC agreed to pay Kraken, a cryptocurrency exchange, $30 million in disgorgement, prejudgment interest, and civil penalties in exchange for the exchange's commitment to discontinue offering staking services to U.S. clients in February 2023. Kraken was charged by the regulator with not registering its program for staking virtual assets as a service.
