Binance's native token, BNB, posted a significant drop on its daily chart after a New York regulator ordered Paxos Trust to stop creating more BUSD stablecoins.
As seen on the TradingView chart, the BNB token plunged from a high of $315 to a low of $288 before slightly rebounding. At the time of publication, BNB was down 4.88% to $293.
Binance coin BNB slumped >8% after New York Regulator ordered Paxos Trust to stop creating more of its #BUSD token. BUSD is a stablecoin backed by US Dollar, which was created in 2019 in partnership betw crypto platform Binance & blockchain comp Paxos. BNB is native Binance token pic.twitter.com/TXu514EEQ6— Holger Zschaepitz (@Schuldensuehner) February 13, 2023
As reported, the New York Department of Financial Services (NYDFS) ordered Paxos, which issues Binance's dollar-pegged cryptocurrency, to cease minting new BUSD tokens. Paxos will continue to manage redemptions of the product.
The United States Securities and Exchange Commission (SEC) also sent Paxos a Wells notice, saying that BUSD is an unregistered security. Companies that get Wells notices are permitted to reply in writing and explain to the SEC why a lawsuit should not be filed. The SEC's Wells notices do not guarantee that it will pursue enforcement action.
Binance CEO responds
Changpeng "CZ" Zhao, the CEO of Binance, has responded to the recent BUSD news. He says, in summary, that BUSD is issued and redeemed by Paxos. "And funds are safu," he said, citing assurances from Paxos about the safety of funds.
On the alleged SEC v. Paxos lawsuit, CZ says he has no information about it, other than public news articles.
"If" BUSD is ruled as a security by the courts, it will have profound impacts on how the crypto industry will develop (or not develop) in the jurisdictions where it is ruled as such. Binance will continue to support BUSD for the foreseeable future, CZ added.
The Binance CEO hinted at further plans in the wake of the regulatory call: "We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. e.g., move away from using BUSD as the main pair for trading."
He continued, "Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm."