Paxos ordered to stop minting Binance-branded stablecoin amid SEC lawsuit

  • Paxos was ordered by regulators to stop issuing Binance’s dollar-pegged stablecoin.
  • The cryptocurrency firm will stop minting BUSD next week as it reportedly faces an SEC lawsuit.
  • BUSD is the third largest stablecoin in the world, but the SEC has called it an unregistered security, according to the WSJ.

Crypto firm Paxos has been ordered to stop issuing Binance’s dollar-pegged coin amid a broader regulatory crackdown following a lawsuit reported by the Securities and Exchange Commission (SEC).

A statement released on the Paxos website said it would cease issuing the form BUSD token on February 21, under guidance from the New York Department of Financial Services (NYDFS).

On Sunday, the Wall Street Journal reported that Paxos was facing an SEC lawsuit over the BUSD offering, which the regulator said was an unregistered security.

Paxos and Binance have partnered to launch BUSD in 2019. The Binance-branded stablecoin is pegged to the US dollar on a one-to-one ratio.

In a Monday statement to Insider, a Binance spokesperson confirmed that Paxos had received orders from the NYDFS to stop minting the coin. He said the stablecoin was wholly owned and managed by Paxos, and as a result, the coin’s market cap would only decline over time.

“Given the current regulatory uncertainty in certain markets, we will be reviewing other projects in these jurisdictions to ensure our users are protected from undue harm,” added the spokesperson.

BUSD is the world’s third-largest stablecoin behind Tether and USD, with a market cap of over $16 billion as of Monday, according to CoinMarketCap. The price of BUSD dropped 0.19% on Monday morning following news of a crackdown.

Regulators’ grip on the cryptocurrency market is rapidly increasing after the FTX collapse. It has already sued crypto giants Genesis and Gemini over the offering and sale of unregistered securities linked to its collective Gemini Earn program, which collapsed following the collapse of Sam Bankman-Fried’s FTX exchange.

Last week, cryptocurrency exchange Kraken agreed to end its “stakes” program, which offered rewards if investors held certain digital assets, agreeing to pay $30 million in a settlement to the SEC in the process.

The NYDFS and SEC did not immediately respond to the Insider’s request for comment.

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