Twelve hoursafter The Wall Street Journal (WSJ) reported that cryptocurrency firm Paxos isfacing a Securities and Exchange Commission (SEC) lawsuit over violations ofuser protection regulations, the further events escalated quickly. The company decided to haltmint of new Binance's BUSD tokens, and the cryptocurrency exchange ChiefExecutive, Changpeng 'CZ' Zhao, calms clients by saying that funds are safe
SEC to Go After Paxos
The WSJreported on Monday night that, according to people familiar with the matter,the SEC intends to file a lawsuit against Paxos, a stablecoin provider and the itBitcrypto exchange operator.
New York regulators directed a crypto company to stop issuing one of the largest dollar-pegged cryptocurrencies as a government clampdown on the sector widens https://t.co/iPfHjdo2lV
— The Wall Street Journal (@WSJ) February 13, 2023
The SEC wassaid to have sent the company's representatives a so-called Wells notice, atype of document the agency uses to inform entities of potential legal actionsagainst them. According to the regulator, the Binance USD (BUSD) stablecointhat Paxos mints and lists bear the hallmarks of unregistered securities.
Thefour-year partnership between Binance and Paxos that began in 2019, has nowcome into question. Meanwhile, the SEC is putting pressure on the cryptoindustry, having cracked down on Kraken, another crypto exchange, for offeringcryptocurrency staking services. The platform has agreed to pay $30 million indamages and suspend further staking.
Followingthe news, Paxos announced on Monday that it is suspending the mint of new BUSD tokens.
Paxos Reacts Immediatelyand Stops BUSD Mint
Informationpublished on the official Paxos blog shows that the company has decided to endits partnership with Binance for the BUSD-branded stablecoin. As of 21 February2023, the platform will suspend the issuance of new stablecoins, as the NewYork Department of Financial Services (NYDFS) recommended. There was aseparate announcement last week that the NYDFS also wants to initiateproceedings in the Paxos case.
"PaxosTrust, a regulated institution overseen by the NYDFS and audited by a top-fouraccounting firm, will continue to manage BUSD dollar reserves. All BUSD tokensissued by Paxos Trust have and always will be backed 1:1 with USdollar-denominated reserves, fully segregated and held in bankruptcy remoteaccounts," the company explained.
1/ This morning, Paxos announced it will halt minting new #BUSD tokens effective February 21. Read the full press release from Paxos here: https://t.co/jXZY1ak8DR
— Paxos (@PaxosGlobal) February 13, 2023See AlsoUnderstanding Tax Implications of Cryptocurrency in Czechia 2024Crypto Regulations Worldwide: A Comprehensive OverviewVisual privacy: part of GDPR compliance, and better security - Global Banking | FinanceHow the Rollback of Obama-Era Financial Regulations Could Affect You
BUSD tokensalready issued will continue to be backed by Paxos and exchangeable until atleast February next year. New and existing customers of the company will beable to exchange their USD or BUSD funds for USDP, a Paxos-issued regulatedstablecoin backed by the dollar.
Watch the recent FMLS22 panel on forex and crypto trends in 2023.
Binance CEO Reassures That'Funds Are Safu'
Momentsafter Paxos published the statement, the CEO of Binance took to Twitter, wherehe assured users that funds belonging to them were safe. He confirmed Paxos'earlier words suggesting that the company would continue to operate the BUSDand manage redemptions.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
However,the market capitalization of the BUSD will shrink due to ongoing regulatoryactions, and the exchange will look for solutions using stablecoins that arenot based on the US dollar, CZ added.
It shouldbe recalled that the BUSD is the main asset for many of the margin tradingpairs used on Binance. If the court does indeed recognize stablecoin as asecurity, it will have a huge impact on the industry and force Binance to carryout significant remodelling of its product offering.
The newscaused a momentary drop in the BUSD stability, with the price briefly droppingto below 0.9990. It was the strongest deviation from the $1 peg since the firsthalf of January. However, the broad cryptocurrency market has so far notreceived the news negatively, with Bitcoin losing only 0.5% and moving justunder $22,000.
Twelve hoursafter The Wall Street Journal (WSJ) reported that cryptocurrency firm Paxos isfacing a Securities and Exchange Commission (SEC) lawsuit over violations ofuser protection regulations, the further events escalated quickly. The company decided to haltmint of new Binance's BUSD tokens, and the cryptocurrency exchange ChiefExecutive, Changpeng 'CZ' Zhao, calms clients by saying that funds are safe
SEC to Go After Paxos
The WSJreported on Monday night that, according to people familiar with the matter,the SEC intends to file a lawsuit against Paxos, a stablecoin provider and the itBitcrypto exchange operator.
New York regulators directed a crypto company to stop issuing one of the largest dollar-pegged cryptocurrencies as a government clampdown on the sector widens https://t.co/iPfHjdo2lV
— The Wall Street Journal (@WSJ) February 13, 2023
The SEC wassaid to have sent the company's representatives a so-called Wells notice, atype of document the agency uses to inform entities of potential legal actionsagainst them. According to the regulator, the Binance USD (BUSD) stablecointhat Paxos mints and lists bear the hallmarks of unregistered securities.
Thefour-year partnership between Binance and Paxos that began in 2019, has nowcome into question. Meanwhile, the SEC is putting pressure on the cryptoindustry, having cracked down on Kraken, another crypto exchange, for offeringcryptocurrency staking services. The platform has agreed to pay $30 million indamages and suspend further staking.
Followingthe news, Paxos announced on Monday that it is suspending the mint of new BUSD tokens.
Paxos Reacts Immediatelyand Stops BUSD Mint
Informationpublished on the official Paxos blog shows that the company has decided to endits partnership with Binance for the BUSD-branded stablecoin. As of 21 February2023, the platform will suspend the issuance of new stablecoins, as the NewYork Department of Financial Services (NYDFS) recommended. There was aseparate announcement last week that the NYDFS also wants to initiateproceedings in the Paxos case.
"PaxosTrust, a regulated institution overseen by the NYDFS and audited by a top-fouraccounting firm, will continue to manage BUSD dollar reserves. All BUSD tokensissued by Paxos Trust have and always will be backed 1:1 with USdollar-denominated reserves, fully segregated and held in bankruptcy remoteaccounts," the company explained.
1/ This morning, Paxos announced it will halt minting new #BUSD tokens effective February 21. Read the full press release from Paxos here: https://t.co/jXZY1ak8DR
— Paxos (@PaxosGlobal) February 13, 2023
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BUSD tokensalready issued will continue to be backed by Paxos and exchangeable until atleast February next year. New and existing customers of the company will beable to exchange their USD or BUSD funds for USDP, a Paxos-issued regulatedstablecoin backed by the dollar.
Watch the recent FMLS22 panel on forex and crypto trends in 2023.
Binance CEO Reassures That'Funds Are Safu'
Momentsafter Paxos published the statement, the CEO of Binance took to Twitter, wherehe assured users that funds belonging to them were safe. He confirmed Paxos'earlier words suggesting that the company would continue to operate the BUSDand manage redemptions.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
However,the market capitalization of the BUSD will shrink due to ongoing regulatoryactions, and the exchange will look for solutions using stablecoins that arenot based on the US dollar, CZ added.
It shouldbe recalled that the BUSD is the main asset for many of the margin tradingpairs used on Binance. If the court does indeed recognize stablecoin as asecurity, it will have a huge impact on the industry and force Binance to carryout significant remodelling of its product offering.
The newscaused a momentary drop in the BUSD stability, with the price briefly droppingto below 0.9990. It was the strongest deviation from the $1 peg since the firsthalf of January. However, the broad cryptocurrency market has so far notreceived the news negatively, with Bitcoin losing only 0.5% and moving justunder $22,000.
