Binance's Stablecoin Under Fire: Rival Circle Sounds the Alarm to NY Regulators

cryptonews.com:

Circle, the US-based payments company that issues the stablecoin USD coin (USDC), alleged that major crypto exchange Binance did not fully back some of its own stablecoin proxies - and on Monday, blockchain infrastructure platform Paxos was ordered to cut its connection with Binance in regard to the Binance USD (BUSD) stablecoin.

Circle alerted the watchdog that it found some issues in blockchain data that allegedly showed that Binance did not store enough crypto in reserve to support the number of tokens it had issued, Bloomberg reported, citing a person familiar with the matter.

Then yesterday, the New York State Department of Financial Services (DFS) issued a statement saying that Paxos is under its supervision and that,

"DFS has ordered Paxos to cease minting Paxos-issued BUSD as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD."

It further said that the DFS authorized Paxos to issue BUSD on the Ethereum blockchain, but that, 

"The Department has not authorized Binance-Peg BUSD on any blockchain, and Binance-Peg BUSD is not issued by Paxos. There is currently no restriction on the listing or exchange in New York of existing Paxos-issued BUSD by DFS-licensed entities."

Per Bloomberg, citing an NYDFS spokesperson, Paxos was unable to operate BUSD "in a safe and sound manner," and it "failed to address key deficiencies, requiring further Department action, ordering Paxos to cease minting Paxos-issued BUSD." 

Subsequently, on February 13, Paxos announced its plans to end its relationship with Binance for BUSD. On February 21, Paxos will stop issuing new BUSD tokens as "directed by and working in close coordination" with the NYDFS, it said. A Circle