Rival Stablecoin Warned NY Financial Watchdog About BUSD

“The regulator for the capital of capital markets does not need a single company to bring to its attention a widely evidenced and reported situation,” says Circle spokesperson

article-image

Satheesh Sankaran/Shutterstock.com modified by Blockworks

share

Binance USD might just be in hot water because of rival stablecoin issuer Circle.

Circle, the creator of USD Coin, warned the New York State Department of Financial Services (NYDFS) in the autumn of 2022 about inefficiencies in Binance’s token management system, Bloomberg reported Tuesday. 

The regulator was reportedly told Binance didn’t have adequate reserves to support the Paxos-issued BUSD token, based on blockchain data.

On Monday, the state department ordered Paxos to stop minting BUSD “as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance.” Paxos then informed customers it would end its relationship with Binance for the issuance of the stablecoin and that from Feb. 21, it will no longer issue new BUSD. 

Circle declined to comment, citing communication with regulator, but said it is widely known that Binance announced it would convert one-to-one USDC, USDP and TUSD stablecoins to Binance’s own BUSD. 

“The regulator for the capital of capital markets does not need a single company to bring to its attention a widely evidenced and reported situation. Public blockchains make this information visible and immutable,” a spokesperson told Blockworks.

NYDFS didn’t return Blockworks’ request for comment by press time.

BUSD currently has a market cap of around $16 billion but Binance CEO Changpeng Zhao said, “as a result of the NYDFS enforcement action, its market cap will only decrease over time.”

Paxos told Blockworks on Monday that BUSD is always backed 1:1 with US dollar-denominated reserves.

Paxos isn’t just facing trouble from one regulator. It could also possibly be sued by the Securities and Exchange Commission over allegations BUSD is an unregistered security.

The actions of the SEC appear to be way off the mark, according to Marcus Sotiriou, market analyst at GlobalBlock. “They have labeled BUSD a security, yet hard-pegged stablecoins have no expectation of profit and have a fixed price, like stored value Gift Cards.”

The SEC also recently charged crypto exchange Kraken for the offer and sale of its crypto staking as-a-service program. Kraken has neither admitted or denied the allegations, but agreed to settle for $30 million. 

Jason Gottlieb, a cryptocurrency lawyer, noted on Twitter that the SEC’s claim about “all crypto projects have to do is come in and register” is insulting because several projects are plainly refused. Register as what when the regulations don’t fit? 

Loading Tweet..

“People are desperately trying to figure out how to offer a product legally whilst getting zero guidance,” Sotiriou said.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template (6).png

Research

Trading of the President's TRUMP memecoin sent the market capitalization to over $15B, resulting in all-time highs for Solana’s Real Economic Value, DEX volumes, and stablecoin supply. This event further validates Solana as the venue for high-throughput onchain activity, with Solana DEXs and DeFi applications as primary beneficiaries, while also signaling to further experimentation, utilization, and adoption of memecoins as legitimate financial instruments for speculation, crowdfunding, or capital formation. President Trump’s continued willingness to experiment in crypto reaffirms a highly-favorable political and regulatory climate for the industry.

article-image

Back in 2021, there were really only two memecoins and both hit enormous peaks along with BTC

article-image

Polygon Labs CEO Marc Boiron thinks that yield-bearing stablecoins could be the next big narrative

article-image

A Nova Labs exec referred to the last-day lawsuit “as irresponsible as it is wrong-headed”

article-image

Corresponding resolutions were introduced to “roll back the disastrous” rule requiring custodial brokers to report transactions

article-image

Donald Trump has slightly backed off from the ambitious tariff goals he touted on the campaign trail

article-image

Some have called it “a relief” that the task force will be led by the crypto-friendly Hester Peirce