Paxos will stop minting Binance’s stablecoin BUSD at the direction of the New York Department of Financial Services (NYDFS). BUSD is the third most popular stablecoin with $16 billion outstanding, media reports said.
On Sunday, SEC said that it was contemplating a lawsuit against Paxos for issuing unregistered securities in the form of BUSD.
According to Binance, New York-based fintech company Paxos issues and manages BUSD. Binance has given Paxos a license to use its brand for the stablecoin.
Stablecoins have emerged as a $135 billion sub-category within crypto and as a compelling blockchain use case. It plays a key role in the overall blockchain ecosystem. The stablecoin market is led by Tether’s USDT with $69 billion outstanding, followed by Circle’s USDC at $41 billion.
As the minting of new BUSD comes to a grinding halt, the $16 billion market occupied by it is up for grabs, intensifying competition among existing players.
In a day of quick developments, media reports suggested that rival stablecoin company Circle tipped off NYDFS in the fall of 2022 that BUSD was not fully backed.
On Monday, Paxos countered this claim in a press release and said all BUSD tokens issued by it were fully backed by the USD reserves.
As fear, uncertainty, and doubt gripped Bianance products, withdrawals on Monday surged to enormous proportions, clocking $831 million of net outflow in 24 hours, the largest in a day since November.
