The cryptocurrency market was shaken today by the New York Department of Financial Services action regarding Binance USD (BUSD), the stablecoin of the world’s largest cryptocurrency exchange Binance. Now, interesting information about the background of this action emerges. According to Bloomberg’s report, Circle, the name behind Tether (USDT) that raised the alarm in Paxos.
A competitor emerged from the back of the event that shook the market!
New York’s largest financial regulator is investigating stablecoin issuer Paxos. According to a new report, it was rival stablecoin issuer Circle that sounded the alarm. Bloomberg revealed on Monday that Circle informed the New York Department of Financial Services (NYDFS) in the fall of 2022, complaining that Blockchain data allegedly did not have sufficient reserves to support BUSD tokens that Binance issued through Paxos. Bloomberg’s report comes days after it was revealed that NYDFS was investigating Paxos.
An NYDFS spokesperson on Monday told Reuters that Paxos is not managing BUSD in a ‘safe and sound’ manner. As such, it alleged that it violated the obligations issued by Binance and Paxos to conduct specific, periodic risk assessments and due diligence refreshes for BUSD clients to prevent ‘bad actors from using the platform.
Meanwhile, it is worth noting that Binance, the world’s largest crypto exchange, stopped supporting the Circle stablecon, USDC, towards the end of last year, and started converting all USDC to BUSD. This brings to mind ‘Is the Circle retaliating?’ brings the question.
NYDFS orders Paxos to stop issuing Binance USD
NYDFS has instructed Paxos to stop issuing BUSD due to concerns over its relationship with Binance. Paxos has agreed to stop issuing new BUSD tokens. However, in a press release released on Monday, he stated that all of the BUSD tokens it issues are fully backed by US dollar reserves.
Paxos’ regulatory concerns do not end with NYDFS’ ongoing investigation. On Sunday, it was reported that the US Securities and Exchange Commission (SEC) plans to sue Paxos for issuing BUSD as an unregistered security. It also emerged that the U.S. Office of the Currency Supervisor (OCC), a federal bank regulator, may ask Paxos to withdraw its application for a full banking contract. By the way, it should be noted that Paxos received a temporary bank contract from the OCC in 2021. Paxos, on the other hand, denied these rumors. Circle has not yet responded to requests for comment on the subject.
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