According to reports, the New York Department of Financial Services (NYDFS) has ordered Paxos Trust to stop issuing Binance USD pegged to the dollar
After the SEC sent Paxos a wells notice — a letter that warns companies of upcoming enforcement action — the New York regulator took action shortly after. According to the notice, Binance USD is an unregistered security.
Paxos will continue to manage redemptions of BUSD tokens, according to a Binance statement. The NYDFS has reportedly asked Paxos to stop creating more BUSD tokens.
With increasing scrutiny surrounding the crypto market, the most recent regulatory action on the third largest stablecoin is being taken. Kraken was forced to shut down its crypto staking offering after the SEC ruled crypto staking services violated securities law last week. Coinbase is taking up the battle, claiming its staking products are not securities.
It has been a long-running securities debate in the crypto market since the SEC filed a lawsuit against Ripple, the company behind the XRP token.
Token. The case has yet to be resolved. Generally, if an investment is made in a business with the expectation of profits coming from someone other than the investor, it is considered a security.
Stablecoins are an important on-ramp for users taking their first steps into crypto, so security allegations against a stablecoin could pose a major challenge to the crypto industry. For more information on stablecoins as securities, we consulted law experts. Despite the fact that stablecoins are supposed to be stable, one lawyer said that buyers can potentially profit from arbitrage, hedging, and staking.