News

BUSD Issuer, Paxos Finally Breaks Silence on SEC’s Ban on Stablecoin

Published

1 month ago

February 14, 2023

Binance stablecoin (BUSD) issuer company Paxos has finally broken the silence on the U.S. Securities and Exchange Commission’s (SEC) ban on its stablecoin, arguing that the decision was misplaced and would be litigated as per a report.

According to a Feb. 13 statement, Paxos established the claim that it has halted the minting of new BUSD tokens effective Feb. 21 following the BUSD Ban by the New York Department of Financial Services (NYDFS).

1/ This morning, Paxos announced it will halt minting new #BUSD tokens effective February 21. Read the full press release from Paxos here: https://t.co/jXZY1ak8DR
— Paxos (@PaxosGlobal) February 13, 2023

The imposition was made after the US SEC served Paxos a Wells notice, stating that it failed to register the offering under federal securities laws.

Meanwhile, Paxos maintained that it will continue to manage all outstanding BUSD reserves with utmost assurance that all BUSD are fully backed 1:1 alongside US dollar-denominated reserves.

3/ Paxos will continue to manage all outstanding BUSD reserves, ensuring all BUSD are always backed 1:1 with US dollar-denominated reserves held in bankruptcy remote accounts.
— Paxos (@PaxosGlobal) February 13, 2023

Paxos explained that the allegation raised by the U.S. SEC is unfounded because BUSD cannot be classified as a security. It further stated that it will engage with the SEC staff on the issue via litigation.

BUSD Ban Aided Net Outflows from Binance Exchange

While Binance is not the owner and issuer of BUSD, the latest development has negatively affected the exchange as it recorded over $788 million net outflow within 24 hours that the ban was imposed according to blockchain platform Nansen.

busd paxos

However, Dune analytics data revealed that the withdrawal was the largest 24-hour net outflow since Dec. 17 when Binance’s proof-of-reserve became a subject of public concern.

In light of the new development, Binance exchange maintained that “Funds are SAFU.” Recall that Binance recorded a withdrawal of more than $1 billion within 12 hours last year without any hassle.

Interestingly, Binance CEO Changpeng Zhao (CZ) maintained that the exchange will continue to support BUSD for the foreseeable future even though there is a high tendency that users will migrate to other stablecoins over time.

7/ Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.
— CZ 🔶 Binance (@cz_binance) February 13, 2023

There is no mincing word that Binance had experienced several moments of fear of doubt and uncertainty (FUD) and has been able to weather the storm. To this end, CZ reiterated that FUD is temporary.