The New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos to stop issuing the Binance USD (BUSD) stablecoin, which is pegged to the US dollar.
This action was taken after the United States Securities and Exchange Commission (SEC) sent a letter to Paxos, alleging that Binance USD is an unregistered security.
As the issuer of BUSD, the Paxos Trust Corporation, governed by New York law and holding a provisional charter from the Office of the Comptroller of the Currency, is responsible for the stablecoin’s management. Binance, however, states that BUSD is fully owned and managed by Paxos.
Paxos will continue to service BUSD and oversee redemptions, ensuring that user funds are secure and fully backed by bank reserves. The company will also reassess its projects in regions with regulatory uncertainty to protect its users from harm.
The recent regulatory action against BUSD is part of an ongoing crackdown on the already-spotlighted cryptocurrency sector. Last week, the SEC declared that cryptocurrency staking services are illegal under the Securities Exchange Act, leading Kraken to end its staking offering.
Coinbase CEO, Brian Armstrong, has expressed concern over the potential ban on retail cryptocurrency staking by US regulators, calling it a “terrible path” for the US. Armstrong believes staking is crucial to the industry, as it has the potential to improve stability and security and reduce carbon emissions.
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