The NY Department of Financial Services has claimed blockchain company Paxos Trust Co. to stop with immediate effect the issuance on Binance USD (BUSD) stablecoin because the stablecoin is an unregistered security, therefore, a not legal asset.
BUSD is the third biggest stablecoin and ranks fifth in the overall ranking of cryptocurrencies, with a market capitalization of 16 billion dollars. It is not yet clear what NYDFS claims against Paxos, but the Department previously imposed strict rules on stablecoins, requiring all issuers to maintain a separate asset pool sufficient to maintain parity with the dollar.
Paxos license has not been revoked yet, but this investigation could have repercussions in the crypto exchanges and led to a massive exode of different stablecoins, mainly BUSD and USDP. In fact, many competing platforms are already removing stablecoins for fear to face regulatory troubles. Particularly, Crypto.com exchange had have declared previously that will eliminate USDT stablecoin to comply with local regulatory requirements.
In the other hand, Binance platform doesn’t have to panic. Cryptocurrency exchange reserves are money that the platform keeps in separate accounts and does not use in trading operations, BUSD is therefore, sufficiently insured.
However, in case of a massive exode of BUSD, the crypto exchange Binance could sell some of the other assets and cover some holes to avoid the dollar parity loss.