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Bloomberg reports that a few months before the introduction of a ban on the issuance of Paxos-Binance stablecoins, Circle sent a complaint against a competitor to regulators.
At the end of 2022, one of the largest issuers of stablecoins, Circle Internet Financial, filed a complaint with the DepartmentNew York Financial Services (NYDFS) on the Paxos Trust, which regulates stablecoin issuers in the state of New York.Circle alerted the watchdog to the problems found by its team and claimed that Binance and Paxos do not havesufficient reserves to support Binance USD (BUSD) stablecoins.
Part of the crypto community suggests that Circle was forced to take action by Binance's discriminatory policy, which introduced
In 2022, the forced auto-conversion of USD Coin (USDC) to BUSD, ostensibly in order to increase liquidity and capital efficiency.
Binance's decision hit its competitor hard.As a result, Circle, the issuer of the USDC stablecoin, reported that due to the default of FTX and the auto-conversion of USDC to BUSD on the Binance exchange, the company’s losses amounted to about $3 billion.
After verifying Circle's complaint regardingPaxos-Binance On Monday, February 13, the NYDFS ordered Paxos to cease issuing BUSD stablecoins and interacting with Binance. The regulator drew attention to Paxos that the current license only provided for the release of BUSD on the Ethereum blockchain and did not imply the conversion of BUSD into a version on BNB Chain.
Paxos complied with the regulator's requirement and also announced
about termination of cooperation with Binance and the release of new BUSD. Since executing the order to stop using Binance stablecoins (BUSD), Paxos has burned over 400 million BUSD.
US Securities and Exchange Commission(SEC) sued Paxos, alleging that the BUSD stablecoin is an unregistered security. The US Office of the Comptroller of the Currency (OCC) also asked Paxos to withdraw
application for a banking license.
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