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NY Regulator Shutdown Major Stablecoins As Major Crackdown Continues

Following the massive crackdown on major stablecoin firms by the US regulatory authorities, one of the city’s top stablecoin companies has been affected by this move. Paxos Trust Company, one of the world’s largest cryptocurrency firms and stablecoin developers, was ordered on Monday to stop minting the popular BUSD, owned by one of the biggest cryptocurrency exchanges, Binance.

The deadline is actually on the 21st of February, even while the crackdown continues. The New York Department of Financial Services executes this exercise. This event has affected many other big companies, including PayPal, who are said to be working with Paxos to introduce and launch their stablecoin.

But since the interference with the government authorities, this project has been halted until further notice. Meanwhile, Paxos are not the only victims; the New York-based authorities have also instructed all crypto companies involved in minting the stablecoin to immediately halt the process, as the process of hurting all digital assets continues.

Paxos Comments on the Matter

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In the cause of the recent development, Paxos Trust Company has through an official statement on Monday stating that it will comply with authorities’ directives. Analysts believe the clampdown was necessary because of the declining dollar value because these stablecoins are pegged to the USD.

In the statement by the company, the minting of the BUSD will be formerly paused, pending when the issue has been resolved. They also affirmed to their customers that while they wait for a positive outcome, they will continue working with New York Financial Services for a well-regulated cryptocurrency industry. The company also stated that it will continue to support the operations of the already minted BUSD in terms of redemption until February 2024.

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Industry stakeholders are optimistic that the company and the regulators will be able to resolve the issue before the 2024 deadline. Although many doubts have been raised on the availability of the already minted BUSD tokens in the market, many believe that some crypto whales will take advantage of the impending scarcity to monopolize the limited available ones. 

The Reserves

It has been stated that Paxos and Binance launched the famous BUSD, a stablecoin backed by the US dollar, in 2019. Since its launch, it has gained so much in the market that it has been named the third biggest stablecoin in the world. Reports also have it that before the crackdown, the BUSD was (and still is), according to CoinMarketCap, the 7th largest crypto in terms of market cap, with a total value of £13bn (approx. $16B). 

But in all of this, Binance is the most affected because, according to their recent statement, following the suspension on minting new stablecoins, they revealed that it owns Paxos, and the company is also responsible for licensing its brands.

The survey has shown that the BUSD is the most used stablecoin among cryptocurrency traders. Hence, its suspension will have a lasting effect on trading activities globally. Also, in a statement issued by the management of Binance by the boss himself: Changpeng Zhao, through his Twitter handle, acknowledged the unfolding event in Paxos. 

In the tweet, Zhao was noted saying that the event would only affect the market capitalization, causing it to decrease. He further cleared the air that all is well with the BUSD as Paxos reserves cover the bank’s available funds.

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Meanwhile, The Wall Street Journal reported on Sunday that the SEC that during the crackdown on these stablecoin companies, Paxos was fully informed about the plans by the SEC. In the report, the SEC had threatened Paxos, claiming that the BUSD is not a registered security. His tweet stated that should the court rule in favor of the BUSD, recognizing it as security; it will positively affect the entire crypto space.

Although there has not been any formal statement on the impending lawsuit, the story has it that Binance is currently undergoing intensive scrutiny by the authorities following an alleged case of rule violation.


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Brenda Collins

Brenda Collins is a seasoned crypto news writer with a deep passion for blockchain technology and its transformative potential. With years of experience in the industry, she has honed her skills in delivering concise and insightful analysis, making complex concepts accessible to a wide audience. Brenda's dedication to staying up-to-date with the latest developments in the crypto world ensures her readers receive accurate and timely information.

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