As is traditional, let’s start with an explanation. In 2019, Paxos and cryptocurrency exchange Binance entered into a partnership under which the company would be able to issue stablcoin under the trading floor’s licence. That is, in this case, it is Paxos, not Binance, that is responsible for issuing BUSD. However, it is done in the form of partnership, which means that Paxos can share profits with Binance from BUSD transactions.


As journalists believe, it is this feature that could allow regulators to pick on what is happening and characterize BUSD as a security. Otherwise, it makes no sense because the value of stabelcoins is tied to the assets at their base - in this case, the dollar - and does not change over time. Consequently, users earn nothing from owning BUSD, so profit and its promise are out of the question here.


The article about BUSD on the site of Binance Academy emphasizes that the stabelcoin is a regulated crypto-asset, the value of which is tied to the dollar. At the same time, the product is fully collateralized, which means that in exchange for each BUSD there must be a dollar in a Paxos bank account.

An article about BUSD on the site of Binance Academy

The article also emphasizes that BUSD operates under the New York regulator. Accordingly, it can be assumed that Binance contacted Paxos in part because the latter has various licenses that allow it to operate in the state.

Information on the regulation of the BUSD stablcoin in an article on the Binance Academy website

What is the BUSD for?

BUSD is the native steiblocoin of the Binance ecosystem, that is, the exchange itself and the BNB Chain blockchain. The coin is quite popular on the trading platform. Prior to the current situation, it accounted for about 35 percent of trading volume on the platform in steablecoin pairs. The leader in this case is USDT from Tether.

Here is the corresponding chart from Kaiko analysts.

Market share of stablcoins within the Binance exchange

Where does the popularity come from? First of all, stablcoin allows you to trade on Binance with zero commissions for the maker and taker – that is, those who place limit and market orders. Accordingly, large traders will find it more profitable to use BUSD, as it does save on commissions.

BUSD allows you to trade on Binance with zero commissions

It is also important to recall that in September 2022, the Binance exchange enabled auto-conversion of USDC, USDP and TUSD staples to BUSD. That is, users could not trade the listed coins, but they were automatically converted to BUSD for trading.

Obviously, this was done to improve liquidity within the exchange, which traditionally does not show the best results in a bearish trend. That is, coins for trades were no longer dispersed among several trading pairs with different stackcoins, but concentrated in BUSD. Therefore, users were in theory getting better trade execution terms and less slippage - that is, a change in the real trade execution price compared to a given one.

Whether or not Binance received income from BUSD trades is not known for certain. However, it is unlikely that the company would have promoted its own stablecoin so aggressively for nothing.

Why BUSD Stablecoin was banned

According to Cointelegraph’s sources, information about the Securities and Exchange Commission’s claim against Paxos appeared in The Wall Street Journal. The journalists, citing insiders, said that the SEC had written to the firm to sue it over the issuance and listing of BUSD. The main claim is that Stablecoin is allegedly a security that has not been registered with the regulator.

The US Securities and Exchange Commission regularly creates problems for cryptocurrency creators by accusing them of launching securities. Such an initiative requires special registration with the regulator, which developers predictably do not do. However, the SEC cannot always prove its position. For example, in Ripple's XRP litigation, which began in December 2020, the regulator is still unable to prove its own case.

Website of Paxos, the issuer of the BUSD staplecoin

The speaker of the Commission in a recent interview declined to give any comment on the regulator’s actions. In the meantime, a Binance spokesperson commented as follows.

Stablecoins are a critical safety net for investors seeking refuge from volatile markets, and restricting them will directly harm millions of people around the world. We will continue to monitor the situation. A wide range of stabelcoins are available to our users.

Binance CEO Changpen Zhao

Binance CEO Changpen Zhao has also responded to the situation. A translation of his full Twitter feed is available here, and the key points are outlined below.

“IF BUSD were to be treated as a security by a court, it would have a noticeable impact on the further development (or lack thereof) of the crypto industry in jurisdictions with this approach.

Binance will continue to support BUSD for the foreseeable future. We also assume that over time users will switch to other staplecoins and we will make changes accordingly – for example, we will stop using BUSD as the main trading pair for trading and so on.

Changpen also noted that Binance will now look for a new issuer of stablcoins. And the stabel itself won’t necessarily be pegged to the dollar – and the euro is the most likely option here.

In general, Paxos Trust specialises in a variety of blockchain-based products, including the issuance of stablcoins. The company was founded back in 2012 and since then its list of services has expanded considerably. In September 2019, Paxos entered into a partnership with Binance, the terms of which included the issuance of the Binance USD token. The token issuance was also approved by NYDFS, which was one of the reasons for the partnership for Binance.

In other words, Binance does not issue BUSD itself - Paxos handles all organisational issues as well as securing the stablcoin.

Now, NYDFS management has ordered Paxos to suspend issuance of BUSD entirely. Representatives of the body said that the company allegedly failed to fully safeguard investors in BUSD from risks. Here is also a comment from the NYDFS spokesperson on the matter.

Paxos has breached its obligation to conduct individual periodic risk assessments and project due diligence updates for Binance customers and issued Paxos BUSDs to prevent attackers from exploiting the platform.

Paxos statement on suspension of BUSD issuance

The company has had to comply with the regulator’s demand – its representatives have already announced that Paxos will indefinitely suspend the issuance of new BUSD tokens. This most likely means that the company will no longer issue Stablecoin. However, BUSD redemption and conversion operations will be supported by Paxos until at least February 2024.

Confirmation of the suspension of BUSD issuance by Paxos


Redemption in this case means the purchase of stablcoins by the company from people who want to exchange them for fiat. Such an operation involves burning the BUSD received from the total turnover of the crypto-asset.


Amid all the news, the BNB native token of cryptocurrency exchange Binance has fallen more than 7 per cent in 24 hours.

BNB exchange rate over the past seven days

Other interesting details on the case emerged tonight. In particular, representatives of Paxos said that they will interact with representatives of the Securities and Exchange Commission, and if anything, they are ready for a lawsuit.

Particularly interesting was the news about Circle, the issuer of the USDC stabelcoin. According to sources, it was representatives of this company that informed the regulator in the fall of 2022 about alleged problems with the exchange Binance and the BUSD stablocoin. According to them, Binance allegedly did not have enough crypto assets to ensure that all BUSD tokens were in circulation.

Amusingly, it was in the autumn that Binance turned on the already mentioned automatic conversion of USDC to BUSD, essentially shutting down trading in a pair of Circle's stablcoin. In this regard, representatives of the cryptocurrency community assumed that in this way the company wanted to take revenge on Binance and create problems for its stablecoin. The idea tentatively succeeded.

Circle chief executive Jeremy Allaire

Overall, the regulatory attack coincided with fresh sanctions against Kraken, so a targeted war by U.S. regulators against the digital asset industry is already becoming apparent. However, it did not make much sense to start it: unnecessary pressure on cryptocurrency companies and uncertainty will simply force them out of the country, which will lead to the suspension of cryptocurrency innovation and under-recovery of budget revenues through taxes in the US.


We think this initiative by US regulators is quite strange. First of all, such behavior will force companies to leave this jurisdiction and look for regions with friendlier laws. Another fact that adds confusion is that the New York regulator was not against BUSD, but now its representatives have completely changed their mind. Obviously, if giants don't get certainty about regulations and their work, then the US market will lose many companies, startups and platforms. Cryptocurrency innovation will continue elsewhere.