Digital Assets: SEC Takes Aim At The BUSD Stablecoin, Sparks Redemptions

February 14, 2023 | Artificial Intelligence, News

The SEC alleges that BUSD is an unregistered security.

The US Securities and Exchange Commission (SEC) has issued a Wells notice to Paxos Trust Company, stating its intention to sue the firm for allegedly issuing unregistered securities in the form of the Binance USD (BUSD) stablecoin. Paxos issues several popular stablecoins and is regulated by the New York State Department of Financial Services.

BUSD is a stablecoin founded by Paxos and Binance.

Binance CEO Changpeng Zhao (CZ) has reassured users, however, that funds are safe, but noted that users may migrate to other stablecoins over time. This move is seen as part of an escalating campaign by US regulators against crypto companies. (Crypto News)

Paxos will not issue any more BUSD

Meanwhile, Paxos has announced that it will end its relationship with Binance for the branded stablecoin BUSD. Effective February 21, Paxos will cease issuance of new BUSD tokens as directed by the New York Department of Financial Services, but Paxos Trust will continue to manage BUSD dollar reserves.

BUSD will remain fully supported by Paxos and redeemable through at least February 2024, Paxos stated. Customers can convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin issued by Paxos Trust.

Redemptions triggered

The stablecoin BUSD has seen increased redemption activity, with nearly $290 million worth redeemed in less than eight hours following the reports of regulatory scrutiny. Its market capitalization was around $23.24 billion three months ago, and over 30% of its supply has been redeemed in the past 90 days. Its trade volume is now around $17.60 billion.

Related Story:  Binance Launches “Binance Mirror,” A Cold Custody Solution For Institutions

Image credit: Binance Academy

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