The New York Department of Financial Services (NYDFS) has called on crypto company Paxos to stop issuing the Binance stablecoin BUSD due to unresolved issues with Paxos’ oversight of its relationship with Binance. As a result, Paxos announced the termination of the BUSD issuance on February 21 and the retention of previously issued BUSDs until February 21, 2024. Binance appears to be turning the page on Paxos and is urging its customers to migrate to other stablecoins.
Binance USD stablecoin no longer issued
The BUSD, the third largest stablecoin weighing nearly $16 billion, is probably on its way out. The New York Department of Financial Services (NYDFS) has ordered Paxos Trust Company to stop issuing the Binance USD stablecoin. The regulator blames the Paxos crypto company for “several unresolved issues related to Paxos’ oversight of its relationship with Binance through BUSD.” The nature and extent of the issues alleged against Paxos were not disclosed by the regulator.
In response to this injunction from the New York Department of Financial Services (NYDFS), Paxos has announced that it will cease issuing the BUSD stablecoin on February 21. However, holders of the BUSD stablecoin should not worry. Paxos reassures that existing BUSD tokens remain fully backed by sufficient reserves. Thus, BUSD holders will be able to continue trading the stablecoin until February 24, 2024. Paxos even encourages its customers to exchange their BUSD tokens into Pax Dollar (USDP), another stablecoin issued by the company.
Paxos has always put the safety of its customers’ assets first. This was true at our inception and remains true today. BUSD will remain fully supported by Paxos and exchangeable to embedded customers at least until February 2024.
Paxos
Binance USD (BUSD) is a stablecoin pegged to the US dollar. It was launched in 2019 by Binance and Paxos. With a capitalization of nearly 16 billion, BUSD is the third largest stablecoin after USDT and USDC.
Binance drops Paxos and recommends migrating to other stablecoins
Cryptocurrency exchange Binance has reacted to the announcement that the BUSD stablecoin will be discontinued. In a thread published on February 13, Binance CEO Changpeng Zhao made a point of clarifying that the BUSD stablecoin is fully managed and owned by Paxos. CZ also made it clear that a gradual decline in the capitalization of the BUSD is to be expected.
The CEO of Binance is keen to protect the users of his platform. In this sense, CZ has encouraged Binance users to migrate to other stablecoins. Binance is even considering adjusting its products for the future. The exchange does not rule out, for example, removing the BUSD from its platform.
We expect users to migrate to other stablecoins over time. And we will make product adjustments accordingly. For example, dropping the use of the BUSD as the main pair for trading, etc.
CZ
Beyond the BUSD, Binance is keen to protect its users in a context of regulatory uncertainty in some markets such as the US. The exchange has indeed announced that it will examine other crypto projects in certain jurisdictions. These reviews will be made public and will allow Binance customers to avoid any undue harm, CZ hopes.
After the collapse of the UST last year, the stablecoin that will disappear this year is likely the BUSD. The good news is that unlike the UST, no one will lose their funds. Users have more than a year to get into the black. It is unlikely that they will wait until 2024 to do so, as massive withdrawals of BUSD have already been reported.
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