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Paxos has been ordered by regulators to stop issuing Binance’s dollar-pegged stablecoin.
The crypto firm will stop minting BUSD next week, as it reportedly faces a lawsuit from the SEC.
BUSD is the world’s third largest stablecoin, but the SEC has called it an unregistered security, per WSJ.
Crypto firm Paxos has been ordered to halt issuing Binance’s dollar-pegged coin, amid a wider regulatory crackdown that follows a reported lawsuit by the Securities and Exchange Commission (SEC).
A statement released on Paxos’s website said it would cease issuance of the BUSD token form February 21, under guidance from the New York Department of Financial Services (NYDFS).
On Sunday, the Wall Street Journal reported that Paxos was facing a lawsuit from the SEC for the offering of BUSD, which the regulator said was an unregistered security.
Paxos and Binance entered into a partnership to launch BUSD in 2019. The Binance-branded stablecoin is pegged to the dollar on a one-to-one ratio.
In a Monday statement to Insider, a Binance spokesperson confirmed Paxos had been ordered to cease minting the coin by the NYDFS. It said the stablecoin was wholly owned and managed by Paxos, and as a result the coin’s market cap would only decrease over time.
“Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm,” the spokesperson added.
BUSD is the world’s third largest stablecoin behind Tether and USD coin, with a market cap of more than $16 billion as of Monday, according to CoinMarketCap. The price of BUSD was down 0.19% early on Monday following the news of a crackdown.
Regulators’ grip on the crypto market is quickly tightening in the wake of the collapse of FTX. It has already sued crypto giants Genesis and Gemini for the offer and sale of unregistered securities linked to their collective Gemini Earn program, which crumbled after Sam Bankman-Fried’s FTX exchange collapsed.
Last week, crypto exchange Kraken agreed to end is “staking” program, which offered rewards if investors locked in their holding of certain digital assets, agreeing to pay a $30 million in a settlement to the SEC in the process.
The NYDFS and the SEC didn’t immediately respond to Insider’s request for comment.