Binance USD (BUSD) Stablecoin Allegedly Reported to NYDFS by Circle

Apparently, Cirle reported USD Coin's reserves to the NY State Department of Financial Services in 2022, which was the probable cause of Binance's ongoing problems with American regulators.

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Binance's on-chain stablecoin holdings were found to be inconsistent by blockchain data monitoring company Circle. Binance USD's stability-coin Binance USD was not supported in full due to these differences in cryptocurrency reserves.

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Earlier this year, Circle moved to register BUSD before the US Securities and Exchange Commission threatened to sue Paxos.

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It further stated that BUSD released by Paxos is always 1:1 backed with US dollar-denominated reserves, fully segregated, and stored in bankruptcy distant accounts, which do not fall under federal securities laws.

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As a result, Paxos is prepared to vigorously litigate if necessary in order to resolve this issue.

At least for now, Binance ends its partnership with Paxos

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A regulatory action by the NYDFS was announced on February 13, instructing Paxos to "stop minting the BUSD issued by Paxos" and insisting that tokens issued under its regime be backed by cash or cash equivalents.

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A recent inspection and Paxos's inability to promptly address material concerns associated with BUSD it had issued led to the NYDFS finding that Paxos was unable to manage BUSD safely and reliably.

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Paxos and Binance terminated their long-standing relationship as a result of NYDFS requests. CZ, however, said the Binance exchange would continue to support BUSD for a significant period of time.

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After Circle's USD stablecoin (USDC) caused Paxos, the issuer of the competitor stablecoin BUSD, to cease generating new coins in less than 24 hours, USDC's trading volume increased by over 67.74%.

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There is more than $68 billion in market capitalization for Tether USDT compared to $40.9 billion for USDC and $15.7 billion for Binance USD (BUSD). As a result of the de-pegging to $0.9995 on Trade Algo, the BUSD has fallen by 0.05% in the last 24 hours.

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Circulate and Binance has been in fierce competition for some time since Binance introduced a rule that automatically converted all USDC deposits into BUSD. 

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The situation has not yet been commented on by Circle.

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