Blockchain infrastructure provider Paxos will stop issuing new Binance USD stablecoins on the orders of the New York Department of Financial Services (NYDFS). The firm has also revealed that the token is facing SEC scrutiny.
In a statement, Paxos says it is ending its relationship with Binance and will stop issuing BUSD tokens from 21 February. Tokens already in circulation will continue to be backed 1:1 with US dollar-denominated reserves.
The NYDFS ordered the move “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance".
In a separate statement, Paxos says it has been notified by the SEC that the watchdog is "considering recommending an action alleging that BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws".
The firm says it "categorically disagrees" and that BUSD is not a security under federal laws.
"BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts," the statement continues. "We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary."