The Securities and Exchange Commission (SEC) has revealed that it’s going after Paxos, the issuer of Binance USD (BUSD), the third-largest stablecoin. According to the agency, Paxos has been violating investor protection rules.
The firm announced that it would end its relationship with crypto exchange Binance in connection to BUSD and halt the minting of the stablecoin. In addition, Paxos disclosed that existing BUSD coins are fully backed and can be redeemed for a year.
Changpeng Zhao, the Binance CEO, took to his Twitter handle to say that Paxos had informed him that the BUSD issuer’s regulator, the York Department of Financial Services, had also directed the firm to end issuing the stablecoin.
Since 2019, Paxos has owned and issued BUSD after Binance allowed it to use its brand name. Data from CoinGecko shows that BUSD has a Market Capitalization of about $16.3 billion. The stablecoin has become popular due to its increased use on Binance.
SEC Escalates Regulatory Efforts
Despite SEC revealing it was filing a lawsuit against Paxos, the BUSD issuer did not mention the agency in its statement. In recent months, SEC has ramped up efforts to take control of the current messy crypto industry.
A few days ago, the regulator demanded that exchange Kraken end its crypto-staking services for US citizens and pay over $25 million in penalties. Gary Gensler, the SEC chairman, has told the non-compliant crypto firms that the agency was coming for them.
However, some of his colleagues do not support the chairman’s enthusiasm for the crypto crackdown. After last week’s SEC settlement with Kraken, the agency commissioner Hester Peirce said SEC didn’t provide clear guidelines for registering crypto staking services.
Binance Affected by Attack on BUSD
Meanwhile, news about SEC’s impending crackdown on Paxos has affected Binance, with its native token BNB dropping 5% in the past 24 hours, as per CoinGecko. Also, since the exchange receives licensing fees from Paxos, it risks losing its revenue stream.
The regulatory attack on BUSD could also mean it might lose popularity. The token has so far given two of the largest stablecoins, USDT and USDC, a run for their money.
