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The New York financial regulator determined that Paxos lacks the capability to issue Binance USD cryptocurrency in a secure manner
According to Reuters, a representative from the New York State Department of Financial Services (NYDFS) explained their decision to halt Paxos' BUSD issuance. The spokesperson indicated that Paxos was unable to maintain adequate safety and security standards in issuing Binance's stablecoin.
The regulatory body instructed Paxos to cease creating new BUSD tokens on February 13.
"A declaration of war": Understanding the significance of the BUSD issuance prohibition
In an official communication to Reuters, the NYDFS representative explained that Paxos failed to meet its responsibilities regarding regular risk evaluations and proper user verification for both Binance and BUSD token holders, which was necessary to prevent illegal activities on the platform.
Additionally, Paxos faces scrutiny from the Securities and Exchange Commission (SEC). The agency has informed Paxos of potential legal action for breaching investor protection regulations, claiming that BUSD qualifies as an unregistered security.
