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Paxos Scores Big: SEC Greenlights BUSD

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Paxos, a blockchain infrastructure platform has scored a major relief after the SEC’s investigation cleared it of any wrongdoing and concluded that BUSD, a Binance-based stablecoin, is not a security. As per the official press release, the regulator sent a notice dated July 9, 2024, stating that it won’t pursue against the firm in the investigation of Binance USD, setting a new precedent for the stability and regulation of stablecoins in the cryptocurrency market.

Paxos
Paxos Scores Big: SEC Greenlights BUSD 2

The dollar-backed stablecoin issued by Paxos was the third biggest stablecoin after Tether’s USDT and Circle’s USD. In 2019, the firm teamed up with leading crypto exchange Binance and rolled out the stablecoin, which was approved by the New York State Department of Financial Services NYDFS.

At the time, Binance’s former CEO Changpeng Zhao a.k.a CZ assured that the trading platform licensed the Binance brand to Paxos, and BUSD was “wholly owned and managed by Paxos.” But everything changed when the U.S. Securities and Exchange Commission issued a Wells notice to the firm alleging that BUSD is unregistered security.

A Wells notice is a letter the regulator sends to inform entities of planned enforcement action. The recipient firm has a deadline of 30 days to react with a legal brief known as a Wells submission, in which it can explain why charges shouldn’t be pursued against potential defendants.

Subsequently, the NYDFS issued a directive ordering Paxos to halt creating new BUSD, citing particular outstanding problems with Paxos’ management of its BUSD partnership with Binance. As a result of the regulatory pressure, the firm decided to cut ties with Binance and announced that they are working with the SEC to come up with a reasonable solution.

USD-Backed Stablecoins Set to Transform Financial System-Paxos

Following the latest win, Paxos released a statement stating that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified. It is further hoped that the development will unlock a new wave of stablecoin adoption by leading global enterprises. 

Well-designed stablecoins with strong consumer protections – like those issued by Paxos – will transform the financial system in payments, settlement, and remittance use cases. This transformative technology will make the financial system more stable, accessible, and transparent. 

Paxos Launch Regulatory-Compliant Stablecoin in Singapore

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Paxos, a blockchain infrastructure platform, has introduced a new stablecoin pegged to the USD in Singapore following the acquisition of in-principle approval from the Monetary Authority of Singapore [MAS]. The company’s latest stablecoin aligns with MAS’ stablecoin regulatory framework, unveiled on August 15, outlining essential criteria for issuers such as value stability, capital, and redemption at par. Notably, Paxos stands as the sole entity to receive MAS approval for this initiative, emphasizing its unique position in the market.

While specific details about the new stablecoin, including its name, remain undisclosed, the firm confirmed its USD backing and issuance through the company’s recently established entity in Singapore. In 2022, it achieved a significant milestone by becoming the first U.S.-based blockchain infrastructure platform authorized by MAS to provide digital payment token services under the Payment Services Act 2019.

Paxos
Image Source: Paxos.com

Walter Hessert, Paxos Head of Strategy, highlighted the growing global demand for the US dollar and the challenges faced by consumers outside the U.S. in obtaining dollars securely and in compliance with regulatory standards. MAS’ in-principle approval is seen as a pivotal step for the firm, enabling the company to extend its regulated platform to a broader international user base.

Hessert emphasized Paxos’s commitment to maintaining the highest standards of compliance and oversight, attracting global enterprises seeking stablecoin solutions aligned with regulatory standards to power their businesses and meet customer demands.

Paxos’ Global Alliances

Paxos has established partnerships with leading global enterprises to tokenize, custody, trade, and settle assets. Its blockchain solutions are employed by prominent institutions such as PayPal, Interactive Brokers, Mastercard, Mercado Libre, Nubank, Bank of America, and Societe Generale. The company is recognized as the issuer of various regulated digital assets, including PayPal USD [PYUSD], Pax Dollar [USDP], and Pax Gold [PAXG].

Regulated by the New York Department of Financial Services [NYDFS] in the U.S. and the MAS in Singapore, Paxos has garnered substantial funding, surpassing $540 million from key investors like Oak HC/FT, Declaration Partners, Founders Fund, Mithril Capital, and PayPal Ventures. With a global presence, including offices in New York, London, and Singapore, the crypto firm adopts a comprehensive approach to modernizing the financial system.

Crypto.com, PayPal, & Paxos Join Forces For PYUSD Market Domination

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Crypto.com has made a strategic move by forging an alliance with fintech behemoths PayPal and Paxos to position itself as the preferred PayPal USD [PYUSD] exchange. This partnership entails listing PYUSD on the Crypto.com platform, catering to both retail and institutional users. Currently, the Singapore-based digital exchange boasts the deepest liquidity for PYUSD trading pairs on a global scale.

For the uninitiated, deep liquidity refers to a market that has a high volume of trades and a large number of participants, including banks, financial institutions, and retail traders.

Joe Anzures, Senior Vice President and General Manager for the Americas and Global Head of Payment Partnerships at the trading firm, expressed his enthusiasm for this collaboration, stating, “PayPal has been a true pioneer in the digital commerce evolution, and Paxos is a market-leading issuer of stablecoins. We are tremendously excited to team up with them to collectively advance the crypto frontier.”

Crypto.com
Crypto.com, PayPal, & Paxos Join Forces For PYUSD Market Domination 5

The integration between the two entities doesn’t stop here; it extends to various aspects, including the ability to use PayPal to top up the Crypto.com Visa Card. In accordance with the blog post, this collaboration aims to explore more connected top-up and commerce capabilities in the future, providing a seamless experience for users.

PYUSD is backed by 100% U.S. dollar deposits, short-term U.S. Treasury bonds, and cash equivalents, maintaining a 1:1 redeemable value with U.S. dollars. Paxos Trust Company is responsible for issuing PYUSD. Retail users can already access PYUSD deposits through the Crypto.com app, with additional trading features soon to follow.

Crypto.com Making Waves In Spain

Despite the ongoing global regulatory scrutiny surrounding cryptocurrencies, the virtual asset industry continued to expand its horizons. Crypto.com exemplifies this growth-oriented mindset by targeting new markets. In a recent update, the exchange shared that it had successfully obtained a Virtual Asset Service Provider [VASP] registration from the Bank of Spain. This regulatory milestone paves the way for Crypto.com to operate within Spain, marking its entry into the Spanish cryptocurrency market.

The collaboration between Crypto.com, PayPal, and Paxos signifies a significant advancement in the cryptocurrency sector, while Crypto.com’s expansion into Europe’s leading market underlines its commitment to driving innovation and accessibility in the world of digital assets.

The $500K Bitcoin Fee Fiasco: Unraveling the Fat Finger Error

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A mere 0.008 bitcoin transaction proved too costly for an anonymous entity that paid a whopping $500k worth of BTC. This astronomical fee, amounting to 19.89 BTC, unintentionally etched itself into the pages of Bitcoin history as the single highest payment ever made for a BTC transaction fee. It was a “fat finger” error of colossal proportions that sent shockwaves through the cryptocurrency community.

Speculation initially swirled around payments giant PayPal, casting a cloud of suspicion over its involvement. However, the spotlight soon shifted to crypto services provider Paxos, as its representatives acknowledged their role in the costly blunder and took responsibility for the “mistake.”

Paxos overpaid the BTC network fee on Sept. 10, 2023. This only impacted Paxos’ corporate operations. Paxos clients and end users have not been affected, and all customer funds are safe. This was due to a bug on a single transfer, and it has been fixed. Paxos is in contact with the miner to recoup the funds.

The incident ignited a heated debate regarding whether Paxos should be entitled to a refund for this substantial error. Stake.fish, a mining firm renowned for harnessing its computational resources to mine and stake various networks, was the first to spot Paxos’ exorbitant transaction. Chun Wang, the founder of Stake.fish, disclosed in a recent post that the party responsible for the transaction had a limited window of three days to claim the transaction and potentially receive a refund.

Paxos likely initiated contact with Stake.fish to seek a refund for the exorbitant fees. However, in a subsequent post on Stake.fish’s platform, Wang suggested that the claim had been submitted after the initial deadline, citing timezone disparities.

Bitcoin Remarkable Resurgence

A poll was conducted under Wang’s post on Stake.fish’s platform seemed to capture the sentiments of the community regarding the resolution of this debacle. Out of nearly 1,700 respondents, 37% believed that the fees should be directed to miners, 27% advocated for their return to Paxos, 21% voted in favor of freezing Bitcoin, and the remaining faction favored a 50% split between miners and Paxos.

Meanwhile, Bitcoin exhibited unwavering price dominance, surging impressively to $26.5K. Remarkably, the BTC network has been abuzz with activity, witnessing a daily interaction rate of 1.1 million addresses. This surge represents a peak unseen in five months, underscoring the renewed fervor and engagement within the Bitcoin community.

Binance’s Collaborations With Stablecoin Projects Spark Interest Amidst SEC Regulations 

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Lookonchain, a well-known data analyst platform, posted a thread about Binance’s plans to collaborate with other stablecoin projects following the Securities and Exchange Commission’s (SEC) regulation of BUSD.

As per the thread, Binance has been busy with a flurry of recent activities. They minted a staggering 180M $\TUSD from February 16th to February 24th, which was shortly followed by an announcement of the listing of LQTY in the Innovation Zone on February 28th. And just today, they announced the launch of the TRU perpetual contract.

It is worth noting that both TRU and LQTY have seen an impressive increase in price, surging more than 200% in the last 30 days. As a result, whales have been actively accumulating these tokens, with address “0x4322” buying 23.5M TRU ($2.94M currently) from Binance at an average price of $0.07344 from February 23rd to March 3rd.

Similarly, address “0x7B23” bought 282,510 $LQTY ($701,130 currently) with 274,996 $USDT from February 15th to February 25th, at an average buying price of $0.97. Binance’s plan to collaborate with other stablecoin projects has sparked interest in several other decentralized stablecoins that are not yet in the Binance ecosystem.

Among them are $DAI ($MKR), $FRAX ($FXS), $sUSD ($SNX), and $MIM ($SPELL), which the SEC’s regulation could make more appealing to traders. Furthermore, the upcoming decentralized stablecoins GHO (AaveAave) and crvUSD (CurveFinance) have also piqued interest in the community and are worthy of attention.

However, it’s clear that Binance is positioning itself for success in the ever-changing landscape of blockchain technology. By collaborating with other stablecoin projects, they are paving the way for a more interconnected and robust ecosystem with limitless potential for growth and profitability.

Binance Token BUSD’s Market Cap drops 45%

Binance is facing a crisis as the market capitalization of its stablecoin, BUSD has dropped by 45%. This has resulted in a mass exodus of funds as investors lose confidence in the exchange’s credibility.

The New York regulator’s recent order has limited Paxos’s issuance of BUSD, leading to panic among investors now questioning the safety of their funds on the exchange. Despite this, the peg with the U.S. Dollar remains secure, and users’ funds are relatively protected.

In addition, Santiment, a leading data analytics firm, has recently tweeted that the SEC labeled $BUSD as an unregistered security, causing widespread panic among whale holders of the exchange’s native stablecoin. This has led to uncertainty surrounding Binance’s future and its reputation within the crypto community.

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Source: Santiment

As the storm continues to brew, many investors are wondering if Binance can regain the trust of its users and restore its once-sterling reputation.

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Circle Sounds Alarm Over Binance’s USDC Stablecoin Reserve Shortage To NYDFS

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Circle, the company operating the USDC stablecoin, alerted the New York Department of Financial Services (NYDFS) to potential issues in blockchain data showing Binance did not have enough crypto in reserve to support its issued tokens, Bloomberg reported on February 13th.

It resulted in NYDFS directing Paxos, which shares a regulator with Binance, to end its relationship with the exchange over “unresolved issues.”

Paxos was unable to operate BUSD, a stablecoin it issued under Binance’s branding, “in a safe and sound manner,” according to NYDFS, who cited key deficiencies and a failure to remediate material issues in a timely manner. As a result, Paxos has been ordered to cease minting BUSD and is under close monitoring by NYDFS.

How Binance-Peg Coins Created Issues for Circle & Paxos

The exchange mints billions of dollars worth of Binance-peg or B-Tokens, which are third-party coins like Bitcoin and Ether, made usable on other blockchains through the company’s platform. 

These coins are meant to be backed 1-to-1 by locked reserves. However, the firm acknowledged issues with undercollateralized reserves for BUSD last month.

These issues also affected Circle’s USDC, as the exchange only had $100 million in stored collateral to support $1.7 billion in Binance-peg USDC on one occasion. 

The company admitted to mistakenly mixing reserve assets with exchange-customer funds, leading to a transfer of reserve assets into dedicated collateral wallets.

The company’s auto-conversion policy, implemented in September, automatically converted USDC and other stablecoin deposits into BUSD, decreasing Circle’s share of the stablecoin market. 

The exchange will stop minting new Binance-peg BUSD due to the Paxos change but will not change its auto-conversion policy. 

The firm maintains that B-Tokens have always been 100% backed and that reserves were not always visible due to not being stored “in a single, dedicated wallet in real-time.

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Binance Loses Nearly $1B in Crypto Withdrawals As Paxos Forced To Halt BUSD Minting

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Crypto enthusiasts were in for a shock when Binance, the world’s largest crypto exchange, saw a staggering $1 billion worth of crypto withdrawals within 22 hours. 

According to data shared by Ali Martinez, a renowned crypto analyst, the unprecedented surge was sparked after Paxos, the issuer of BUSD stablecoin, was ordered to stop minting new tokens.

The sudden move sent ripples across the market, with many traders rushing to pull their assets out of Binance. On-chain data from 21Shares’ Dune showed that Ethereum withdrawals from Binance amounted to $900m on February 13, marking the largest single-day outflow since November 24.

Although the reason behind the crackdown on BUSD remains unclear, sources suggest that Circle, the issuer of USDC stablecoin, might have played a role. Reports suggest that Circle raised concerns with Paxos about Binance-Peg BUSD, which is a variant of BUSD and was listed on Binance last year.

The development has left the crypto community divided, with some calling it a victory for decentralization while others fear that it might trigger a market crash. However, Binance has assured its users that their assets are safe and that the exchange will continue to function as usual.

As the crypto industry continues to evolve, incidents like this highlight the need for greater transparency and accountability from issuers and exchanges alike.

The development raises concerns over the stability of stablecoins, which are designed to offer price stability and liquidity in the volatile cryptocurrency market. 

Stablecoins have become increasingly popular among crypto investors and traders, with BUSD being one of the fastest-growing stablecoins in recent months.

The latest incident highlights the potential risks associated with stablecoins and the importance of regulatory oversight to ensure their stability and security. It remains to be seen how the crypto market will react to the sudden halt of BUSD token minting and the subsequent outflow of assets from the leading exchange.

NYDFS’ into Binance-Pegged BUSD Draws Attention

In a recent tweet, Collins Belton’s attorney suggested that the New York Department of Financial Services (NYDFS) may have a specific focus on Binance Pegged BUSD in its ongoing investigation of Binance. 

While ML/OFAC investigations may have increased attention, the attorney believes that the NYDFS’ real motivation is related to alleged instances of Binance Pegged BUSD falling short of full backing. This revelation comes as no surprise, given the NYDFS’ past experience with Tether.

Belton’s attorney also speculated that the SEC might be taking a similar approach to Binance’s stablecoin offerings. It remains to be seen whether the SEC will go after straight BUSD or if Binance Pegged BUSD will be a primary focus. At this time, however, these remain speculative thoughts.

The NYDFS investigation and potential SEC involvement underscore the growing scrutiny on stablecoins and their backing. 

As the industry continues to evolve, regulators are looking to ensure that stablecoins are fully backed and not subject to market volatility. Binance, as one of the largest crypto exchanges, is now in the spotlight and will need to address these concerns to maintain its position in the market.

Related Reading | Paxos Under Fire: SEC Alleges BUSD is Unregistered Security, NYDFS Orders Halt of Issuance

Paxos Under Fire: SEC Alleges BUSD is Unregistered Security, NYDFS Orders Halt of Issuance

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The United States Securities and Exchange Commission (SEC) has issued a wells notice to Paxos Trust Company over allegations that the Binance USD stablecoin is an unregistered security, as reported by WSJ.

On the other hand, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD. The crypto community has given mixed reactions to the news, with some calling it “FUD” and others speculating that it’s an attack against the Binance exchange.

Despite the intended enforcement action, Binance CEO Changpeng “CZ” Zhao has reassured users that funds are safe and that Paxos will continue to service BUSD and manage redemptions. 

The exchange also plans to continue supporting BUSD while acknowledging that users may migrate to other stablecoin tokens. Binance may look into making modifications to its offerings and shift away from relying on BUSD as the primary currency for trading.

Zhao noted that the actions taken by the SEC and NYDFS could significantly impact the ongoing development of the cryptocurrency ecosystem and that ongoing regulatory uncertainty in certain markets would necessitate reviews of other projects.

Paxos to Halt Issuance of Binance USD 

Blockchain infrastructure platform Paxos Trust Company will stop the issuance of new BUSD stablecoins amid an ongoing probe by New York regulators. Starting from Feb. 21, Paxos will cease minting new BUSD tokens in accordance with directions from the NYDFS.

The firm emphasized that the current BUSD tokens will continue to be fully supported and can be exchanged through Paxos Trust Company until February 2024 at the latest. Customers have the option to exchange their BUSD for US dollars or convert it to another stablecoin offered by Paxos called Pax Dollar (USDP).

The firm mentioned that the NYDFS regulates it and is regularly audited by a leading accounting firm. Additionally, Paxos will keep its strong regulatory capital to operate both USDP and its gold-backed stablecoin, Pax Gold (PAXG).

As the firm faces regulatory scrutiny from the SEC and NYDFS over allegations that the Binance USD stablecoin is unregistered security, the crypto community is left to wonder about the future of BUSD and its impact on the cryptocurrency ecosystem.

Binance CEO Changpeng “CZ” Zhao has reassured users that funds are safe and that Paxos will continue to service BUSD and manage redemptions. However, the measures taken by the SEC and NYDFS could have a major effect on the evolution of the cryptocurrency landscape.

Ongoing regulatory uncertainty in certain markets may also necessitate reviews of other projects, potentially leading to further uncertainty in the crypto space. Moreover, as Paxos ends its relationship with Binance and halts the issuance of new BUSD tokens, the future of the blockchain infrastructure platform remains in the balance as regulators continue their probe.

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