Paxos Trust Company, responsible for creating the Binance USD stablecoin, has been ordered by the NYDFS to stop releasing any further BUSDs due to regulatory concerns. Paxos has shown a rapid response time when faced with regulatory directives.
According to the data on the chain, Paxos appears to have burnt more than 700 million dollars worth of BUSD tokens since the start of the week. This took place only a short time after Paxos declared it would halt the minting of any new BUSD coins in response to rising pressure from regulatory authorities.
Nansen, a company specializing in blockchain intelligence, reports that in just 27 hours, starting Monday, the cryptocurrency wallet belonging to Paxos Treasury moved BUSD worth $703 million to a burn address. The stablecoins were effectively removed from circulation as a result of this action.
According to the statistics on Etherescan, the Paxos Treasury completed its first transaction on Monday at 13:47 UTC, which involved the transfer of BUSD valued at $144.5 million. In the subsequent 27 hours, there were a further eight transactions that totaled around $559 million.
BUSD is a stablecoin tied to a fiat currency and backed one-to-one with the US dollar. Paxos, a financial technology company in the United States, was solely accountable for the issuance and trading of the BUSD stablecoin.
The BUSD stablecoin was redeemed for 700 million dollars in just 27 hours, equivalent to six percent of the total coins in circulation. In light of all the recent happenings, the CEO of Binance, Changpeng Zhao, predicted that the market value of BUSD "will only drop over time."
US SEC against Paxos
Amid the recent regulatory action taken by NYDFS, some headlines indicate that the US SEC is prepared to sue Paxos over the accusations that the sale of BUSD stablecoin comprised unregistered security.
This news comes in response to the allegations that Paxos violated federal securities laws by selling BUSD stablecoin. The staff at the SEC has handed in a Wells notice, which implies that enforcement action will be taken soon.
In response to this notification, Paxos said they vehemently disagree (1) with the staff of the SEC since, according to federal securities regulations, BUSD is not considered a security.
Only BUSD is included in the scope of this SEC Wells notice. There are not any further complaints leveled against Paxos at this time. Paxos has made ensuring the security of its clients' assets a top priority from the very beginning.
They further said that both BUSD and Paxos issue is always backed 1:1 by reserves denominated in US dollars, and these reserves are properly separated and maintained in distant bankruptcy accounts. They said they want to communicate with the staff of the SEC and, if necessary, prepare to litigate forcefully.
Even before the New York Department of Financial Services took any action, the issuer of the USDC stablecoin, Circle, alerted the regulator that Binance needed more reserves for its BUSD stablecoin.