Paxos Ceases Issuance of BUSD Tokens, PayPal Pauses Stablecoin Project Amid Regulatory Scrutiny

Paxos, the leading regulated blockchain and tokenization infrastructure platform, has announced that it will cease issuance of new BUSD tokens as directed by and working in close coordination with the New York Department of Financial Services (NYDFS). This follows a Wells Notice from the Securities and Exchange Commission (SEC) on February 3, 2023, which stated that they are considering recommending an action alleging that BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws.[0]

BUSD dollar reserves will be managed by Paxos Trust, a regulated institution overseen by the NYDFS and audited by a top-four accounting firm.[1] Paxos Trust guarantees that all BUSD tokens issued by it are fully supported by 1:1 US dollar reserves, which are held in separate and secure accounts that are protected from bankruptcy.[1] The reserves of BUSD are 100% collateralized, and the instruments held by Paxos as of the end of February 10, 2023 can be found here.[1]

The New York Department of Financial Services (NYDFS) instructed Paxos to cease minting BUSD tokens because “several unresolved issues related to Paxos’ oversight of its relationship with Binance through Paxos-issued BUSD.”, Binance founder Changpeng Zhao responded by saying BUSD was a Paxos product and the regulator’s actions had nothing to do with them, however, it appears that the NYDFS was referring to the Binance-pegged BUSD, which is not directly regulated by NYDFS.[2]

The wellbeing of its customers’ assets has always been of utmost importance to Paxos.[1] Paxos will continue to offer full support for BUSD and customers that have been accepted can redeem the asset until at least February 2024.[3] Paxos customers, both new and existing, have the option to receive their funds in US dollars or exchange their BUSD tokens for Pax Dollar (USDP), a regulated, US dollar-backed, stabilized coin issued by Paxos Trust.[4]

PayPal has also reportedly paused its stablecoin project amid increasing regulatory scrutiny of the cryptocurrency sector.[5] Changpeng “CZ” Zhao, CEO of Binance, stated that, due to a US regulatory clampdown, the crypto industry could shift away from stablecoins tied to the US dollar and even explore algorithmic stablecoins once again.[6]

Unsubstantiated rumors emerged earlier today suggesting that U.S. Securities and Exchange Commission had sent a Wells notice to Circle, however, the company has denied this.[7]

0. “Stablecoin Issuer Paxos Categorically Disagrees With SEC’s Notice Alleging That Binance USD Is a Security” The Daily Hodl, 15 Feb. 2023,

1. “Paxos Will Halt Minting New BUSD Tokens” PR Newswire, 13 Feb. 2023,

2. “Binance’s forced USDC conversion, insufficient reserves killed BUSD” Kitco NEWS, 14 Feb. 2023,

3. “Binance coin slumps as Paxos ordered to stop issuing dollar-based token” MarketWatch, 13 Feb. 2023,

4. “Binance and Paxos Caught up in Crypto Regulatory Crackdown” Investopedia, 13 Feb. 2023,

5. “PayPal Pauses Stablecoin Project Amid Paxos Regulatory Scrutiny”, 12 Feb. 2023,

6. “Binance CEO CZ Says Algorithmic Stablecoins May Make a Comeback” Bloomberg, 14 Feb. 2023,

7. “CryptoSlate Wrapped: CZ tackles Paxos, BUSD issues; Circle denies getting Wells notice from SEC” CryptoSlate, 14 Feb. 2023,