- The New-York based firm would cease minting BUSD effectively on February 21.
- Users have until February 2024 to convert their holdings to USD or Pax Dollar.
The global crypto market cap dipped at least 3% Monday after Paxos, the tokenization infrastructure platform behind Binance-branded stablecoin (BUSD), was directed by the regulators to stop minting the digital asset, ending a 5-year partnership between Paxos and Binance.
In the announcement, the agency said that Paxos is required to redeem their Paxos-issued BUSD tokens for US dollars at a 1:1 exchange rate, as per the compliance protocols of customers in good standing.
Effective February 21, Paxos announced on a blog post that it would cease its issuance of new BUSD tokens per the directive of the New York Department of Financial Services (NYDFS). The platform, however, would continue to support BUSD, the announcement noted, adding that the stablecoin is redeemable to the onboarded customers up until February 2024.
‘‘New and existing customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust,’’ the announcement noted.
Paxos is also under the SEC probe for offering BUSD as an unregistered security
Paxos’ problems started when a report surfaced that the US Securities and Exchange Commission (SEC), was planning to sue the company for selling BUSD without proper registration. Amid the investigation, fresh reports emerged that NYDFS was also investigating the stablecoin issuer.
Specifically, DFS cited what it termed as “several unresolved issues regarding Paxos’ oversight of its relationship with Binance,” as the basis for the recommendation. The authority emphasized, in its press release, that all the stablecoins issued by any company under its purview should be fully backed 1:1 by cash or cash equivalents.
The announcement has pushed most cryptocurrencies to the red, with the current market valuation below the $1 trillion mark. The affected stablecoins, Binance USD (BUSD), and Pax Dollar have depegged to $0.9996 and $0.9969, respectively, following the report.