The US financial regulators have put a halt on further issuance of BUSD, the Binance-branded stablecoin, as part of a crackdown on the cryptocurrency sector. According to the Financial Times Paxos, the stablecoin company behind the issuance of the token, announced that it would end its relationship with the Binance exchange over BUSD, which is used to help traders move in and out of the crypto market more quickly.
The sector’s regulator, the New York Department of Financial Services, called for the stoppage of BUSD minting from February 21. US authorities are increasing their scrutiny of crypto market practices, with the Securities and Exchange Commission last week citing oversight of digital assets as a priority for 2023 and settling charges with Kraken, another exchange, over a crypto-staking programme. Kraken agreed to pay $30mn and discontinue the activity in the US.
What is Binance Branded Stablecoin?
Stablecoins are often used as a store of value between bets on digital coins because they are designed to track the price of the dollar and other traditional currencies. About 16bn BUSD is in issue, making it the world’s third-largest stablecoin, according to CryptoCompare. Although the BUSD token is branded as Binance USD, it is not issued or redeemed by Binance.
The NYDFS cited “several unresolved issues” related to Paxos’s oversight of its relationship with Binance for the token. The agency added that it had not authorised another Binance-issued token, which is linked to BUSD and uses Paxos’ stablecoin as collateral. James Herring, partner at UK law firm Addleshaw Goddard, said, “US regulators appear to be looking to crack down on the industry, possibly at the expense of seeing how digital assets can coexist within the wider traditional financial system.”
Binance has faced scrutiny from regulators around the world, including Singapore, the Netherlands, and the UK. However, the sprawling crypto exchange is facing fresh scrutiny in the US as the Biden administration seeks to clamp down on illicit financing risks associated with digital assets.
Last month, the Treasury department’s Financial Crimes Enforcement Network named Binance as a counterparty to Bitzlato, whose founder was charged with conducting an unlicensed money-transmitting business that transferred more than $700mn in illicit cryptocurrency.
