Government restrictions on the sector are open wide. Meanwhile, New York authorities ordered a crypto firm to halt the development of one of the world’s toughest dollar-peg cryptocurrencies. Paxos Trust Co. produces and lists Binance USD (BUSD). The New York Department of Financial Services instructed it to stop creating additional BUSD tokens. The massive crypto exchange said that it will continue to oversee product redemptions.
Binance USD is a stablecoin pegged to the US dollar with a one-to-one ratio. Paxos and Binance partnered up to develop the stablecoin. Moreover, even the New York State Financial Authority joined the game. Binance claims that Paxos Trust is the issuer and owner of BUSD. Moreover, it stated that the company merely licenses its logo. According to Binance’s website, there were 6.2 million BUSD holders as of February 13th.
This year, regulators have ratcheted up their investigations of crypto businesses. The SEC informed Paxos about the upcoming allegation of breaking investor protection rules. This is new since, the SEC enforcement actions have never subjected a major stablecoin issuer.
In recent years, the cryptocurrency market has grown increasingly valuable. Stablecoins offer a token to trade in and out without calling for bank transactions. Hence, speculators looking to easily buy or sell cryptos have migrated to dollar surrogates. In a turbulent market, it may take days to convert cryptos for cash. This may result in missed trading opportunities.
With the increasing interest rates of the Federal Reserve, companies like Paxos realized a consistent source of income by producing stablecoins and buying funds from clients’ cash deposits in short-term US Treasurys.
Binance USD, the third-largest stablecoin by market cap, has grown significantly. The market cap of Paxos would drop from its current level of around $16 billion if it no longer issued the token.
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