New York’s chief financial regulator said Monday it ordered the firm behind Binance’s stablecoin to stop issuing tokens after it failed to do so in a “secure” manner, in a blow to the world’s biggest crypto exchange. Is.
The New York Department of Financial Services (NYDFS) said in a consumer alert that it has ordered Paxos Trust Company to stop mining Binance USD, citing Paxos’ “unresolved issues” in monitoring its relationship with Binance.
A spokesperson for NYDFS later told Reuters via email that Paxos violated its obligations to conduct “tailored, periodic risk assessments” and due diligence checks on Binance and Binance USD customers by “opening the platform to bad actors.” Needed to stop using.”
Paxos said in a statement that it will stop issuing new Binance USD, which is backed by traditional cash and US Treasury bills, as of February 21, but will continue to support and redeem the token until at least February 2024.
Stablecoins, digital tokens usually backed by traditional assets that are designed to have a stable value, have emerged as one of the key cogs in the crypto economy. They are used in volatile tokens such as bitcoin and as a means of protecting savings against inflation in some emerging economies.
The NYDFS move, analysts said, is a blow to Binance’s efforts to capture market share from larger stablecoin rivals such as Tether and USD Coin. He added that the loss of the New York-regulated status offered by Paxos could also hurt Binance’s appeal to demanding large investors.
“This is a big blow for Binance,” said Ivan Kachkovsky, FX and crypto strategist at UBS. “It remains to be seen if (and when) Binance will be able to find a US-based partner for its stablecoin. The latter appears to be important in view of US regulation on stablecoins coming sooner rather than later.” “
The Race for the ‘Crypto Dollar’
Binance USD is the third-largest stablecoin with approximately $16 billion in circulation, and the seventh-largest cryptocurrency, behind market leader Tether and USD Coin, according to market tracker CoinGecko.
“In theory the token had the potential to replace both crypto as a legitimate dollar form,” said Joseph Edwards, investment advisor at crypto firm Enigma Securities.
“What is being seen on the desk today is a significant flight from business to USDT (Tether),” he said.
Binance Coin, the platform’s native token, was down 9.9%, according to CoinGecko.
Binance CEO Changpeng Zhao wrote in a series of tweets on Monday that the regulator’s decision means that “the business’s market cap will only decrease over time,” adding that Paxos has assured Binance that the funds will be held entirely by Paxos. K banks were covered by the reserve.
Zhao said that Binance will “continue to support BSD for the foreseeable future,” predicting that users will shift to “other stablecoins over time.”
The NYDFS move, first reported by The Wall Street Journal, comes amid a wider crackdown on cryptocurrencies and Binance by US regulators. Reuters previously reported that the Justice Department was investigating Binance for suspected money laundering and sanctions violations. Binance has previously stated that it works regularly with regulatory agencies to address their questions.
The WSJ reported on Sunday, citing unnamed sources, that the US Securities and Exchange Commission has told Paxos it plans to sue the company, alleging that Binance USD is an unregistered security.
The SEC did not immediately respond to a request for comment.
The text of this story is published from a wire agency feed without any modification. Only the headline has been changed.
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