• Circle USDC filed a regulatory complaint against Binance alleging mismanagement of token reserves in 2022.
• The New York State Department of Financial Services received the complaint from Circle several months before the regulator intervened with Paxos.
• The NYSDFS ordered Paxos to terminate its partnership with Binance and cease minting BUSD stablecoin due to unresolved issues related to oversight of their relationship.
Circle USDC Files Regulatory Complaint Against Binance
Circle USDC has filed a regulatory complaint against Binance alleging mismanagement of token reserves in 2022. This was reported by Bloomberg, citing that Circle alerted the watchdog last autumn regarding issues identified in blockchain data that showed Binance did not store enough crypto in reserve to support tokens it had issued.
New York Regulator Intervenes With Paxos
The New York State Department of Financial Services (NYSDFS) received the complaint from Circle several months before intervening with Paxos. On Monday, the NYSDFS ordered Paxos to terminate its partnership with Binance and cease minting BUSD stablecoin due to “several unresolved issues related to Paxos’ oversight of its relationship” concerning the said stablecoin.
BUSD Issuance Terminated
The NYSDFS highlighted that it does not “oversee a token issued by Binance”, thereby terminating any further issuance for the same. Furthermore, both parties have been requested by the regulator to return all funds received from customers since November 2020, when they first announced their collaboration, as well as provide details on all customer accounts associated with such activities within 30 days after receiving the order.
Paxos Responds To Order
In response to this order, Paxos CEO Charles Cascarilla stated that they are committed to full compliance and will honor all requests made by regulators in line with current regulations surrounding digital assets and cryptocurrencies worldwide thus far. He also assured investors and customers that all operations remain unaffected as no funds or user data were ever at risk due to this issue and there is no impact on any user tokens or balances as well.
It remains unclear what implications this action could have for other cryptocurrency exchanges operating within New York’s jurisdiction or whether further actions may be taken against either party involved in this case but what is clear is that regulators are keeping watch over these markets closely and will take necessary steps whenever required to ensure customer safety and financial stability overall.