NYDFS Request for Paxos to Halt BUSD Production

02/15/2023 01:51 • Metaverse Matters • 89 views

According to reports, Coinbase said in its official tweet that this week the New York State Department of Financial Services (NYDFS) asked Paxos to stop issuing the stable currency BUSD denominated in US dollars. Coinbase did not know what aspects of BUSD the United States Securities and Exchange Commission (SEC) might be interested in, but the stable currency was not a security.

Coinbase: stable currency is not a security

Analysis based on this information:

Coinbase recently reported that the New York State Department of Financial Services (NYDFS) instructed Paxos to stop issuing BUSD, which is the stable cryptocurrency denominated in US dollars. Although Coinbase was not aware of the reason why the SEC was interested in BUSD, it maintained that BUSD was not a security.

This directive from NYDFS is significant, as it highlights a potential conflict between state and federal regulators regarding the production of stablecoins, including BUSD. Paxos holds a charter from NYDFS to function as a trust company, which permits it to produce and issue BUSD.

The NYDFS, which became the first state regulatory agency to release digital currency rules in 2015, has been widely recognized as at the forefront of regulating cryptocurrency in the United States. Its directive to Paxos, on the other hand, implies that the state is executing even more control over the emerging and nascent digital currency market.

The SEC, a federal regulating authority, has been keeping tabs on the stablecoin industry and has emphasized its authority over firms and tokens beyond stablecoins in issuing initial coin offerings (ICOs) over the last few years. Nevertheless, the regulator has yet to publish official rules for stablecoins.

A series of stablecoins based on the US dollar have emerged over the last several years, and they have concentrated primarily on developing a stable token to prevent adverse price fluctuations. Tether, the most well-known stablecoin, has encountered several regulatory obstacles over the years. The issuer recently settled a lawsuit regarding allegations of market manipulation, and it remains under investigation by the New York Attorney General.

In conclusion, NYDFS’s directive to Paxos represents an additional point of tension between federal and state regulators in the US cryptocurrency industry. The future regulatory landscape for stablecoins remains uncertain, and regulatory guidance and verification will be crucial for the long-term success of these tokens.

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NYDFS Request for Paxos to Halt BUSD Production

Coinbase: stable currency is not a security

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