The tokenized dollar bUSD, with a market cap of $16 billion, is gradually being phased out after its issuer, Paxos, was ordered to stop minting.
“We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS),” said Changpeng Zhao, Binance’s founder.
“As a result, BUSD market cap will only decrease over time,” he added while clarifying the stablecoin will continue to be managed in regards to redemptions and will keep running.
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bUSD’s peg has moved to the lower side despite Zhao stating “Paxos assured us the funds are SAFU, and fully covered by reserves in their banks, with their reserves audited many times by various audit firms already.”
As you can not mint new tokens, it is not clear whether the peg can be managed with this being the first time that a stablecoin finds itself in this situation.
bUSD is “wholly owned and managed by Paxos,” Zhao says. Binance only has a license from them, but re-adjustments will be made:
“We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.”
The Securities and Exchanges Commission (SEC) has also given Paxos a Wells notice, that being a letter before action.
SEC has told Paxos that it considers the stablecoin an unregistered security with SEC’s chair Gary Gensler previously stating they resemble bank deposits or money-market mutual funds.
Now that Paxos has stopped minting, it’s not clear whether SEC will take any action, with the United States at risk of becoming a no-go jurisdiction.
There are stablecoins issued outside of US however, USDt in particular. Binance itself is not based in US, but in Hong Kong as far as we are aware.
To increase trust they went with the strictly regulated Paxos. It so happens that decision gave regulators power to stop it completely.
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