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](https://www.prnewswire.com/news-releases/paxos-will-halt-minting-new-busd-tokens-301744964.html) on Monday, 13 February. 

The issuance of new BUSD tokens will cease on 21 February, the [crypto](/news/article/the-future-of-crypto-in-the-next-5-years) 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](/news/article/is-crypto-dead) 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](https://www.reuters.com/technology/binance-stablecoin-backer-ordered-stop-issuing-token-binance-ceo-2023-02-13/) (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requests leading BUSD to suffer one of its worst days after around $873 million in net outflows (total amount of coins withdrawn from the wallets of exchanges) were tracked by Nansen, a data provider, on 13 February.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](https://coinmarketcap.com/currencies/binance-usd/historical-data/) 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](https://coinmarketcap.com/view/stablecoin/), 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).


paxos logo over image of laptop and word 'ban'

'Stop Minting Binance Stablecoin' NYDFS Orders

The US SEC (Securities and Exchange Commission) is looking to file a lawsuit against crypto firm Paxos. Regulators have notified the firm that it is infringing on investor protection laws. The [Wall Street Journal said](https://www.wsj.com/articles/crypto-firm-paxos-faces-sec-lawsuit-over-binance-usd-token-8031e7a7?mod=latest_headlines) that the lawsuit relates to one of Paxos’ stablecoins, Binance USD (BUSD). 

The SEC believes that the stablecoin issuer has not registered its BUSD token as a security. It may be misleading for the investors and comes under violation of laws.

## SEC served Paxos a Wells Notice over BUSD

The financial watchdog has also served the stablecoin firm with a Wells Notice. The regulators serve this notice to warn that they may take enforcement action against the firm. 

After receiving the letter, firms usually have to respond within 30 days with a Wells Submission. The submission is a legal brief in which defendants can provide a counterargument. If the argument is valid, the charges can be dropped.

In the Binance USD case, it would be interesting to see how Paxos responds to the Wells Notice.

## What’s Binance's stance on the matter?

Cointelegraph [reported](https://cointelegraph.com/news/stablecoin-issuer-paxos-to-face-sec-lawsuit-over-binance-usd-report) that a spokesperson from Binance shared their views on the matter. The spokesperson says that “Paxos issued and owned" the BUSD token with Binance licensing. 
In addition, they said that the token is authorised and regulated by the Financial Services Department of New York. The token is registered as a "1 to 1 backed stablecoin".

The representative said that stablecoins offer various use cases for investors by protecting them from volatility. They also believed that a lawsuit against BUSD would restrict millions of investors from accessing it. However, the spokesperson assured that Binance is currently closely monitoring the situation.

SEC recently released its annual plan for crypto regularisation in the US. It also [charged the Kraken exchange](/news/article/crypto-tumbles-as-kraken-suspends-staking) for offering securities. This means the SEC is looking to intensify its operations for crypto enforcement.


red iamge of BUSD tokens and Paxos logo floating around

BUSD Probe of Paxos Planned by SEC

The approvals come after the Singapore Monetary Authority released two consultation papers proposing to lower regulatory barriers for [digital asset](/news/article/freeway-crypto-halts) service providers.

## How Circle and Paxos crypto firms received approval 

[Circle](https://www.circle.com/en/pressroom/circle-earns-in-principle-regulatory-approval-in-singapore) obtained in-principal permission for a Major Payments Institution License, which will let it issue cryptocurrency and deal with domestic and cross-border payments. At the same time, Paxos gained authorisation to provide digital payment token services. 

Circle and [Paxos](https://paxos.com/2022/11/02/paxos-secures-major-payments-institution-license-from-monetary-authority-of-singapore/) announced their approvals on November 2, only a week after the Monetary Authority of Singapore [(MAS) released two consultation papers](https://www.mas.gov.sg/news/media-releases/2022/mas-proposes-measures-to-reduce-risks-to-consumers-from-cryptocurrency-trading-and-enhance-standards-of-stablecoin-related-activities#:~:text=Singapore,%2026%20October%202022%E2%80%A6,in%20the%20digital%20asset%20ecosystem.) outlining suggestions for regulating digital payment token service providers and stablecoin issuers under Singapore's Payment Services Act (PSA). 

The Singapore Parliament enacted the PSA in 2019, which seeks to regulate payment systems and empowers the MAS to monitor the behaviour of payment service providers.

## What will Circle and Paxos crypto firms be able to do with approval

Circle, the creator of USD Coin ([UDSC](https://www.coingecko.com/en/coins/usd-coin)), and Paxos, the creator of Pax Dollar (USDP), both US dollar-pegged stablecoins, will now have the approval to sell their stablecoins and digital payment token products in Singapore. 

Circle's Global Head of Public and Chief Strategy Officer, Dante Disparte, believes that the licence would increase the potential for cryptocurrencies and open payment systems to stimulate economic growth in Singapore under the more creative legal environment.

## Paxos crypto firms Asia CEO's view

We're happy to have MAS as our regulator. With their oversight, we'll be able to safely drive consumer adoption of digital assets internationally in conjunction with the world's largest corporations, said the Paxos Asia CEO, Rich Teo. 

While we remain to see how many other enterprises will follow in the footsteps of Circle and Paxos, the [regulatory](/news/article/pgi-global-closed) relaxation comes after MAS rejected over 100 out of 170 applicants in late 2021 under the stricter system.

Singapore is working hard to claim back its reputation as one of the most crypto-friendly countries. However, it remains cautious for individual investors, with Singapore's largest bank, [DBS, recently opting to limit its crypto trading services to approved investors who fulfil strict requirements.](https://www.bloomberg.com/news/articles/2022-09-23/singapore-s-dbs-expands-crypto-trading-for-wealthier-clients#:~:text=DBS%20Group%20Holdings%20Ltd.,%20Singapore's,said%20in%20a%20statement%20Friday.)


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