The US-based blockchain infrastructure platform – Paxos Trust Company – will stop the issuance of new Binance stablecoins (BUSD) from February 21.
Despite this, the firm said it has a “strong corporate balance sheet” and vowed to continue servicing new and existing clients.
Ending the Relationship With Binance
As directed by the New York State Department of Financial Services (NYDFS), Paxos will halt minting new BUSD tokens next week (February 21). However, the entity will keep managing BUSD dollar reserves, assuring all stablecoins have and “always will be backed” 1:1 with US dollar-denominated reserves and kept in bankruptcy remote accounts.
Paxos will continue supporting BUSD until at least February 2024. Customers will get the chance to cash out their holdings in American dollars or convert them into Pax Dollar (USDP) – another stablecoin issued by the firm and pegged to the greenback.
It assured that the regulatory actions will not harm its balance sheet, long-term goals, or capability to serve customers:
“Paxos continues to maintain strong regulatory capital to protect customers, as well as a strong corporate balance sheet to support our long-term business goals. This action does not impact our ability to continue serving new or existing customers, our continued dedication to grow our staff, or fund our business objectives.”
Changpeng Zhao (CZ) – CEO of Binance – said BUSD holders should not be concerned since Paxos will manage redemptions and “fully cover” the reserves in their banks.
He also stated his cryptocurrency exchange should not be involved since the dispute is between the blockchain platform and the US SEC.
“Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. e.g., move away from using BUSD as the main pair for trading, etc.,” the exec added.
The NYDFS order seems to have taken its toll on the entire cryptocurrency market, with Binance Coin (BNB) being among the worst affected. It currently trades at around $293, or 5% less than yesterday.
SEC’s Previous Victim
The Commission recently launched an investigation on the leading American crypto platform Kraken over possible violation of rules when offering securities as staking services to US users. Shortly after, the firm terminated such an offering and paid $30 million in disgorgement, prejudgment interest, and civil penalties.
The crackdown on crypto staking in the US applied by the SEC has caused serious concerns. According to Coinbase’s CEO – Brian Armstrong – this would be a “terrible path” for the world’s leading economy.
He also highlighted the merits of staking, saying it brings enhanced security, scalability, and reduced carbon footprints.
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