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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

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

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

The Stripe-acquired firm has big plans for a streamlined, multi-wallet future

article-image

Both founders of the former crypto lender have now landed in new crypto industry roles

article-image

Bitcoin’s recent peak is a victory lap for curvers left and right

article-image

Securitize CEO Carlos Domingo says institutions are eager to get exposure to tokenization

article-image

Trade isn’t war and prosperity isn’t a contest