'Stop Minting Binance Stablecoin' NYDFS Orders
New York-based Paxos Trust Company, a well-regulated blockchain platform that has been contributing to the building of a new and open financial system, has been ordered by the NYDFS (New York Department of Finance Services) to stop minting Binance stablecoin (BUSD), according to a company statement released on Monday, 13 February.
The issuance of new BUSD tokens will cease on 21 February, the crypto company stated. Paxos added that it would continue to manage BUSD dollar reserves and that tokens already in circulation will still be pegged 1:1 with the US dollar-denominated reserves. The crypto firm will continue to redeem existing tokens until at least February 2024.
Why is Paxos stopping the minting of Binance stablecoin?
The crypto firm made this decision on the back of regulatory pressure from the Securities and Exchange Commission (SEC), which has labelled BUSD and most stablecoins as security. The agency believes Paxos should have registered the digital currency as such.
Aside from the SEC's stance, Paxos decided to act on the instructions of the NYDFS because it violated some of its obligations related to periodic risk assessments and failed to do thorough due diligence checks on its relationship with the BUSD token as well as the crypto firm Binance.
News of the issuance of BUSD tokens stopping has rattled several stakeholders of the digital currency, especially investors.
Many traders and investors made several withdrawal requests leading BUSD to suffer one of its worst days after around $873 million in net outflows (total amount of coins withdrawn from the wallets of exchanges) were tracked by Nansen, a data provider, on 13 February.
In the process, BUSD reached a yearly high in trading volume on the same day, with approximately $13.1 billion exchanged within the period. BUSD tested a day low of $0.9988 but recovered to close the day at $0.9994 and was exchanging hands for $0.9999 in the early hours of 15 February.
Despite the negativity currently surrounding the use of BUSD, the stablecoin has maintained its number three spot on the log of the largest stablecoins by market cap, with more than $15 billion.
While it still trails the US Dollar Coin (USDC) from Circle and the US Dollar Tether (USDT) from Tether Limited in market cap, it commands a higher market value than DAI, TrueUSD (TUSD), Pax Dollar (USD), Gemini Dollar (GUSD), and Fei USD (FEI).
Author: Raphael Minter
Raphael Minter/ Albert Zuhnden (preferred pen name) is a crypto finance writer, data miner, and fundamental analyst. Raphael has written hundreds of articles about centralized and decentralized financial instruments such as precious metals, commodities, stocks, and cryptocurrencies. He broke into digital finance in 2016 and believes digital assets and blockchain technology is the future of finance.