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Paxos Trust Company, which issues Binance USD, said on Feb. 13
that the U.S. Securities and Exchange Commission (SEC) had told
the company it should have registered the product as a security
and is considering taking action against the platform.
On the same day, New York's chief financial regulator said in a
consumer alert that it had ordered Paxos to stop creating the
token.
An NYDFS spokesperson later told Reuters via email that Paxos
violated its obligations for "tailored, periodic risk
assessments" and due diligence checks on Binance and Binance USD
customers needed to stop "bad actors from using the platform".
Binance CEO Changpeng Zhao said that the regulator's decision
meant the market cap of the token would decrease over time.
On Wednesday, the value of all Binance USD was around $10.5
billion, down from $16.1 billion on Feb. 13, according to market
tracker CoinGecko.
The Financial Times reported on Wednesday that investors have
pulled more than $6 billion out of the Binance-branded token in
the past month, citing data from blockchain analytics firm
Nansen.
Analysts said the NYDFS move represented a setback in Binance's
efforts to gain market share from larger stablecoins.
SEC Chair Gary Gensler has previously said he believes some
stablecoins to be securities.
(Reporting by Elizabeth Howcroft; editing by Sinead Cruise and
Jason Neely)
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