Binance and Paxos Caught up in Crypto Regulatory Crackdown

investopedia.com:

Paxos, the largest issuer of regulated stablecoins, has announced it will end its relationship with Binance, and cease issuance of new Binance USD (BUSD) stablecoin tokens starting February 21, after regulatory scrutiny from the New York Department of Financial Services (NYDFS).

The NYDFS ordered Paxos to stop minting BUSD tokens due to “several unresolved issues related to Paxos’ oversight of its relationship with Binance through Paxos-issued BUSD.”

This is not the first time that Binance, the world's largest crypto exchange, has found itself in hot water with U.S. regulators. Binance has been under investigation since 2018 over its compliance with U.S. anti-money laundering rules, according to Reuters.

According to Coinmarketcap, BUSD is the seventh-largest stablecoin by market cap and its value its pegged to the US dollar.In a blog post dated November 2022, Binance said it allows Paxos to mint new BUSD on the Ethereum blockchain and provides it licensing support. The post also said that the BUSD token was «approved by the New York Department of Financial Services» with reserves held only in Federal Deposit Insurance Corporation (FDIC)-approved accounts.

«All BUSD tokens issued by Paxos Trust have and always will be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,» Paxos reassured investors in a statement.

Binance CEO Changpeng Zhao also took to Twitter on Monday to reassure investors that funds were safe in BUSD.He also confirmed that Paxos would continue to manage redemptions of the BUSD stablecoin.

The NYDFS also said that it «is monitoring Paxos closely to verify that the company can facilitate redemptions in an orderly fashion subject to enhanced, risk-based,