The leading crypto firm, Paxos, will stop issuing the third-largest stablecoin, BUSD from February 21. The move comes after an order from the New York Department of Financial Services (NYDFS) to cease the issuance of new BUSD tokens.
The legal authority asked Paxos to stop creating more of its BUSD token. However, Paxos will continue to manage redemptions of the BUSD tokens through Paxos trust company until February 2024.
“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 said.
BUSD token is the third-largest stablecoin that is pegged by U.S. dollars on a 1:1 ratio. The product was launched in 2019 from the collaboration of Binance and Paxos. BUSD is holding over a $16 billion market cap at the time of writing.
The move follows the legal action by the SEC (Security and Exchange Commission) against Paxos for violating investor protection laws. This is the first time when the SEC has taken enforcement action against a prominent stablecoin issuer. The SEC issued a Well letter and informed Paxos about the violation of the law by selling an unregistered security.
The U.S. government has intensified its efforts to clamp down on the crypto sectors widely. The government’s intention seems to be to curb the speculation of digital assets.
Stablecoin is a notorious form of cryptocurrency and its demand soared exponentially in recent years. As stablecoin provides ease during buying and selling, it becomes the top-notch choice for traders.
Paxos is capitalising the stablecoin by issuing and directing the users’ investment in short-term U.S. Treasury. By doing so, it generates more yield thanks to increased interest rates.
