What New York Regulator's Crackdown on Binance USD (BUSD) Means for Investors

[MrD]

Key points

• Paxos will stop issuing new Binance USD (BUSD) later this month, on orders from the New York State Department of Financial Services.
• Paxos says all BUSD are fully backed and investors will be able to redeem their tokens.
• Stablecoins are a core part of the cryptocurrency industry and additional action from the SEC has raised concerns about a wider crackdown.

Several news sources are talking about a regulatory crackdown on crypto, particularly as the Binance USD news comes days after the SEC demanded Kraken cease its staking-as-a-service program. But SEC Chair Gary Gensler has been warning that many crypto exchanges are trading unregistered securities and talking about the dangers of stablecoins since his first speech on crypto back in 2021. It is nothing new.

What does this mean for BUSD?

Essentially, after Feb. 21, no new BUSD will be issued. But Paxos says all the BUSD in circulation are backed "1:1 with US dollar-denominated reserves." If you hold BUSD, you should be able to redeem them. Indeed, the NYDFS says it will monitor Paxos closely to ensure this will happen.

The amount of BUSD in circulation will slowly shrink as people redeem their tokens. Binance founder and CEO, Changpeng Zhao tweeted, "BUSD market cap will only decrease over time." He said that Binance will also move away from using BUSD as the main trading pair on its platform.

https://www.fool.com/the-ascent/cryptocurrency/articles/what-new-york-regulators-crackdown-on-binance-usd-busd-means-for-investors/