The overall value of the cryptocurrency market has sunk to $1 trillion as a US regulator investigates stablecoin issuer Paxos and the Binance USD stablecoin.
The New York Department of Financial Services has ordered Paxos to stop minting BUSD tokens – the seventh-largest stablecoin by market cap – due to “several unresolved issues related to Paxos’ oversight of its relationship with Binance through Paxos-issued BUSD”.
A recent report from the Wall Street Journal also claimed that the Securities and Exchange Commission (SEC) is planning to launch a lawsuit against Paxos for violating investor protection laws as a potential unregistered security.
Paxos will end its relationship with Binance and cease issuance of new BUSD tokens from February 21st.
BUSD is wholly owned and managed by Paxos, Binance CEO Changpeng Zhao confirmed on Twitter. Despite claiming that users’ funds were safe, he added: “Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time.”
Binance has seen a surge of withdrawals, according to blockchain intelligence platform Nansen, with net outflows of $788.5 million in a recent 24-hour period. Peckshield reported that 342m BUSD were burned in just 24 hours.
Binance’s reserves contain $14.4bn worth of BUSD, around 90% of the stablecoin’s market cap. The BUSD makes up 22% of Binance’s total $60bn reserves.