The $700 million redemption of the BUSD stablecoin in just 27 hours represents 6% of the total coins in circulation.
Paxos Trust Co, the issuer of Binance USD stablecoin, has faced an order by NYDFS to stop issuing further BUSDs citing regulatory concerns. Paxos has been quick to respond to regulatory orders.
On-chain data suggests that since the beginning of the week, Paxos has burned more than $700 million worth of BUSD tokens. This happened soon after Paxos announced that it would stop minting further BUSD coins amid mounting regulatory pressure.
As per blockchain intelligence firm Nansen, the crypto wallet belonging to Paxos Treasury transferred $703 million worth of BUSD to a burn address in just 27 hours from Monday. This helped to essentially remove the stablecoins from circulation.
On Monday at 13:47 UTC, the Paxos Treasury sent its first transaction of $144.5 million worth of BUSD, shows data on Etherescan. During the next 27 hours, eight more transactions followed worth some $559 million.
BUSD is a fiat-pegged stablecoin backed 1:1 to the USD dollar. US-based fintech firm Paxos was entirely responsible for wholly issuing and trading the BUSD stablecoin. The latest regulatory action by the New York Department of Financial Services (NYDFS) has caused investors to maneuver by exiting quickly.
The $700 million redemption of the BUSD stablecoin in just 27 hours represents 6% of the total coins in circulation. Amid all the recent developments, Binance chief Changpeng Zhao stated that the BUSD market capitalization “will only decrease over time”.
US SEC vs Paxos
Amid the recent regulatory action by NYDFS, there’s also been some news that the US SEC is willing to sue Paxos over the allegations that the sale of BUSD stablecoin constituted an unregistered security. The staff at SEC has submitted a Wells notice which indicates an upcoming enforcement action. Pasox Trust has responded to this notice. In its statement earlier on Tuesday, February 13, Paxos noted:
“Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. Paxos has always prioritized the safety of its customers’ assets. BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts. We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.”
Even before the regulatory action by NYDFS, USDC stablecoin issuer Circle has warned the regulator that Binance doesn’t have enough reserves for its BUSD stablecoin.
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