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Binance, the world’s largest crypto exchange, said it’s been told by Paxos Trust Co. that the latter has been directed to cease minting a Binance-branded token that ranks as the third-largest stablecoin.
“Paxos has informed us that they have been directed to cease minting new BUSD by the New York State Department of Financial Services,” a Binance spokesperson said in a statement Monday.
“BUSD is a stablecoin wholly owned and managed by Paxos,” the spokesperson said. “As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required. Paxos also assured the funds are safe, and fully covered by reserves in their banks.”
BUSD has a $16 billion market value and acts as a cog both in billionaire Changpeng “CZ” Zhao’s Binance ecosystem and the wider crypto sector. The latest developments highlight an intensifying US squeeze on the digital-asset industry after a $2 trillion rout and the bankruptcy of the FTX exchange.
The native token of Binance’s exchange, Binance Coin, sank as much as 5.5% on Monday. Wider crypto markets were steadier, with Bitcoin little changed.
Stablecoins are intended to hold a set value, for example $1. They come in a variety of forms and some are underpinned by reserves like cash and bonds. Investors often park funds in stablecoins as they move between crypto trades.
Paxos is regulated by the New York State Department of Financial Services and says that reserves for Binance USD are held in cash and Treasuries. It issues its own stablecoin called Pax Dollar, which has a market value of $899 million.