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.
What Happened to BUSD After the NYDFS Order
Following the order, Paxos officially ended its relationship with Binance for BUSD, and the stablecoin entered a gradual closure. BUSD’s circulating supply steadily declined as users redeemed their holdings. At its peak, BUSD had a market capitalization exceeding $16 billion, but the token eventually disappeared from the list of major stablecoins as redemptions continued.
Binance also phased out support for BUSD across its products. The exchange encouraged users to convert their balances into alternative stablecoins, particularly FDUSD, while gradually removing BUSD trading pairs and related services. This accelerated the migration of liquidity toward USDT, USDC and other dollar-backed stablecoins.
In August 2025, the NYDFS announced a settlement with Paxos over historical anti-money laundering and compliance deficiencies tied to its former partnership with Binance. Under the agreement, Paxos agreed to pay a $26.5 million penalty and invest an additional $22 million to strengthen its compliance program. The regulator said its investigation found shortcomings in customer due diligence, transaction monitoring and oversight during the Binance partnership.
Related: What You Need to Know About the Paxos and Binance USD (BUSD) Stablecoin Controversy
U.S regulators continue crackdown on crypto industry
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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