The issuer of crypto\u2019s third largest stablecoin will stop minting new tokens of its Binance-branded coin, as regulators ratcheted up pressure on crypto exchanges and clamped down on the ailing digital assets sector.<\/p>\n
Paxos Trust Co. said on Monday that it will\u00a0end\u00a0<\/a><\/strong>its relationship and cease issuance of the branded stablecoin BUSD from Feb. 21, \u201cas directed by\u201d the New York Department of Financial Services, it said in a statement.<\/p>\n Paxos will continue to support reserves for BUSD and redeem tokens for onboarded customers for at least the next 12 months, it said.<\/p>\n Customer withdrawals of stablecoins from Binance spiked following an initial announcement by Binance, with roughly $183.8 million in stablecoins withdrawn from the platform after 8am London time, according to data from CryptoQuant.<\/p>\n Overall withdrawals also rose, with customers pulling out $462 million worth of cryptoassets from the exchange in the last 24 hours, according to an analysis of the platform\u2019s reserves by Coinglass. This was the highest amount of outflows across all exchanges tracked by the data provider.<\/p>\n The move marks the latest crackdown by financial watchdogs on crypto products, following a months-long rout in digital asset prices that led to a series of high-profile company collapses.<\/p>\n Last week, crypto exchange Kraken said it will scrap so-called staking services in the US and pay $30 million to settle claims by the US Securities and Exchange Commission that the service broke rules.<\/p>\n Paxos could also be facing a possible lawsuit from the SEC for violating investor protection laws, according to a Dow Jones story that cited unidentified people familiar with the matter. The SEC has sent Paxos a so-called Wells notice alleging that BUSD is an unregistered security, the people said.<\/p>\n Stablecoins are blockchain-based tokens that are intended to hold a set value, for example $1. They come in a variety of forms and some are underpinned by reserves like cash and bonds. Investors often park funds in stablecoins as they move between crypto trades, with around $136 billion currently in circulation, making stablecoins the most traded cryptocurrencies.<\/p>\n Bradley Duke, co-chief executive at crypto exchange-traded products provider ETC Group, said the SEC had \u201ctaken a more bellicose stance toward crypto exchanges and their products\u201d since the failure of trading platform FTX in November.<\/p>\n \u201cThe Paxos story is certainly not good news for Binance as BUSD is an important conduit for on exchange liquidity. The bigger question is what is the SEC\u2019s endgame here following last week\u2019s crackdown on Kraken?,\u201d Duke added.<\/p>\n As the third largest, BUSD has a $16 billion market value and acts as a cog both in billionaire Changpeng \u201cCZ\u201d Zhao\u2019s Binance ecosystem and the wider crypto sector. Binance, which does not disclose where it is headquartered, has faced regulatory scrutiny in recent years across various jurisdictions, including the US. Like many of its rivals, the exchange has had to grapple with a lost of investor confidence over recent months, made worse by the sudden collapse of FTX.<\/p>\n Binance Coin, the native token of Binance\u2019s exchange, sank as much as 8.9% on Monday, reaching its lowest point since mid-January. Wider crypto markets dipped, with Bitcoin, Ether and an array of smaller tokens also down.<\/p>\n Around 19% of Binance\u2019s reserves are held in BUSD, and 25.4% in BNB, according to an analysis of the platform\u2019s data by DeFiLlama.<\/p>\n Binance began transitioning traders toward using the BUSD stablecoin last year by automatically converting deposits of most top stablecoins into the branded token, pushing up the share of BUSD on its platform. A Binance spokesperson didn\u2019t immediately respond to a request for comment on whether this policy may change after Paxos\u2019s announcement.<\/p>\n Changpeng Zhao, Binance\u2019s CEO, said in a tweet that Binance would move away from using BUSD as the main trading pair on its exchange.<\/p>\n Paxos is regulated by the NYDFS and says that reserves for BUSD are held in cash and Treasuries. It issues its own stablecoin called Pax Dollar, which has a market value of $899 million.<\/p>\n 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.<\/p>\n \u2014 CZ 🔶 Binance (@cz_binance) February 13, 2023<\/a><\/p><\/blockquote>\nBinance Pressure<\/h2>\n
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