According to rumors, Circle alerted New York authorities about rival Paxos’ errors.
Paxos was instructed by the NYDFS to stop creating new stablecoins BUSD and end its partnership with Binance on February 13. Additionally, Paxos cooperated.
Paxos received a warning from the New York authorities for failing to “safely and appropriately” supervise its stablecoin.
According to Bloomberg, citing an insider, Paxos’ rival Circle complained to the New York watchdog last year about the improper management of Binance’s token reserves. This news comes amid reports that Paxos is under investigation by the US government and faces prosecution for violations related to the issuance of Binance’s stablecoin BUSD.
The New York Department of Financial Services (NYDFS), which oversees both stablecoin issuers within the boundaries of New York state, received a complaint from Circle at the end of 2022, claiming they had discovered evidence on the blockchain that Binance did not maintain enough collateral for the issued amount of BUSD.
After the verification period, the NYDFS on February 13 ordered Paxos to stop issuing new stablecoin BUSD and to end its partnership with Binance. The reason given was that there were “some unresolved issues” with regard to the supervision of BUSD, as well as delays in supplying proof and information. The regulator added that they could not control Binance’s conversion of some of this BUSD into a version on BNB Chain but had only authorized Paxos to issue BUSD on Ethereum.
Following the regulator’s request, Paxos declared the end of its partnership with Binance and ceased issuing new BUSD. The stablecoin corporation, on the other hand, guarantees that their product will always remain 1:1 and backed by US dollars, and that it will continue to honor withdrawal requests from customers until February 2024.
The US Securities and Exchange Commission (SEC) sued Paxos, as was indicated in a prior Coincu News story, claiming that BUSD is an unregistered securities. Paxos has also been urged by the US Office of the Comptroller of the Currency (OCC) to revoke its request for a banking license.
The SEC issued Wells notice from the SEC on February 3, 2023, and in its most recent statement in response to the information demanded by the SEC, Paxos stated that Wells reacted by expressing disagreement with the SEC’s position.
Some believe that Binance’s policy, which has been in effect since September 2022 and converts the balances of all stablecoins deposited by users listed on the exchange into BUSD, excluding Tether, is what led to Circle denouncing to US authorities the wrongdoing of competitors Paxos and BUSD (USDT). Due to this move, BUSD’s market share climbed and peaked in November 2022, while USDC’s market share decreased.