The New York Department of Financial Services has ordered Paxos Trust Co., the issuer of Binance’s dollar-pegged cryptocurrency, to stop creating more BUSD tokens. Despite the halt in issuance, Paxos will continue managing redemptions of the stablecoin.
What is Binance USD?
Binance USD (BUSD) is a stablecoin backed by the U.S. dollar on a 1:1 basis. In 2019, Binance and Paxos partnered to launch the stablecoin, which was approved by New York’s financial regulator. As of February 13, 2023, Binance’s website reports that there were 6.2 million holders of BUSD.
Regulators have stepped up their scrutiny of crypto companies this year, with the Securities and Exchange Commission informing Paxos that it plans to sue the company for violating investor protection laws. This would be the SEC’s first enforcement action against a major stablecoin issuer.
Binance USD Market Cap to Drop
Binance USD had grown to become the third-largest stablecoin by market cap, with a value of approximately $16 billion on Monday. However, with Paxos no longer issuing the token, its market cap is expected to drop. Despite this, the stablecoin was still trading close to its $1 value early Monday morning.
Stablecoins have become increasingly popular in recent years among traders looking to easily buy and sell cryptocurrencies. The stable tokens provide a secure means of trading in and out of cryptocurrencies without the need for bank settlements. This is significant as traditional cryptocurrency exchanges can take days to exchange cryptocurrencies for cash, resulting in missed trading opportunities in a volatile market.
