Paxos, the issuer of Binance USD (BUSD) stablecoin with a market cap of $16 billion, has burned over $700 million worth of BUSD tokens since the beginning of this week. According to data from blockchain research company Nansen, a Paxos treasury wallet transferred BUSD tokens worth $703 million to a burn address within 27 hours starting from the morning of February 13. This is essentially a process of removing these coins from circulation.
Over $400 million $BUSD was burned in less than 20hrs as the New York Department of Financial Services ordered Paxos to stop issuing BUSD
According to WSJ, “BUSD will continue to be redeemable through at least February 2024 for U.S. dollars or Paxos’ own stablecoin, Pax Dollar.” pic.twitter.com/cpU7jiEG5M
— Nansen 🧭 (@nansen_ai) February 14, 2023
Paxos’ treasury sent the first transaction of $144.5 million worth of BUSD early on February 13. Eight more transactions were made a few hours later, worth around $559 million.
BUSD is a stablecoin issued by New York-based financial technology company Paxos Trust Company, backed by cash and U.S. bank deposits in reserve.
Investors have the right to redeem their BUSD for Paxos, meaning the company will hold the investor’s BUSD and burn them, then transfer back dollars to the investors. This process will reduce the amount of tokens in circulation while maintaining the price at $1.
This move shows that investors are quickly exiting BUSD. It is noteworthy that the buyback of up to $700 million in just over a day accounted for about 6% of the total value of BUSD in circulation, while the overall supply of BUSD continued to decline in January 2023, plummeting even further after the nearly $6 billion drop due to Binance’s December 2022 incident.
The news broke over the weekend when the U.S. Securities and Exchange Commission (SEC) sent a lawsuit notice to Paxos, accusing BUSD of being a security, signaling an impending enforcement action from the regulatory agency. On the other hand, the New York Department of Financial Services is also investigating the company and has ordered Paxos to stop minting new BUSD tokens.
Under such pressure from the U.S. government, Paxos is also facing “a heavy blow” from its partner Binance CEO Changpeng Zhao, who directly responded with a not-so-optimistic outlook on the relationship between Binance and Paxos amidst the turmoil. This is also the main reason for the increase in the amount of money withdrawn from Binance due to the crackdown on Paxos – BUSD.
Read more:
- Binance USD (BUSD) Peg Shatters As Value Falls Below $1 After SEC Accuses Paxos Of Unregistered Securities
- New York Regulators Crack Down On Crypto: Binance’s BUSD Token Creation Halted
- Paxos, Issuer Of USDP And Binance USD (BUSD) Stablecoins, Under Investigation By NYDFS
- Paxos To Halt Relationship With Binance, Encourages Customers To Convert BUSD Tokens To Pax Dollar (USDP)