The New York State Department of Financial Services (NYDFS) has said that Paxos is not allowed to "guarantee" the circulation of the digital currency Binance USD (BUSD). A representative of the regulator told Reuters that Paxos failed to "safely" release the Binance stablecoin.
Earlier in February, news emerged that the NYDFS was investigating the activity of the BUSD issuer Paxos. The regulator did not disclose what they were investigating and declined to comment further. On February 13, they issued an order banning Paxos from issuing any new Binance USD tokens.
The regulator concluded that the BUSD issuer "ignored its duty to conduct regular risk assessments and due diligence on Binance users and BUSD tokens released by Paxos to prevent misuse of the platform," a NYDFS representative explained in a letter sent to Reuters.
Furthermore, Paxos has been subjected to a thorough review by the U.S. Securities and Exchange Commission (SEC). They announced their intention to sue them for violating investor protection laws because they believe that BUSD is an unregistered security.