The complaint was reportedly filed six months before NYDFS launched its own investigation.
Circle, a peer-to-peer payments technology company and the issuer of USDC stablecoin, has reportedly filed a complaint to the New York State’s Department of Financial Services (NYDFS) over Binance’s reserves.
According to the Bloomberg report shared on February 13th, the stablecoin issuer submitted the complaint in autumn 2022.
Did you know?
Want to get smarter & wealthier with crypto?
Subscribe - We publish new crypto explainer videos every week!
How Can You Earn Money With Axie Infinity? (AXS Animated Explainer)
The person familiar with the matter revealed that in the complaint, Circle alleged that Binance’s reserves were insufficient to support its tokens, including Binance USD (BUSD) stablecoin.
On top of that, the person who wanted to remain anonymous added that the team behind the Circle allegedly noticed the insufficiencies in the blockchain data.
After almost six months, the New York financial watchdog is taking action. On February 13th, NYDFS ordered Paxos, Binance USD (BUSD) stablecoin issuer, to halt minting BUSD tokens and stop its relationship with crypto exchange Binance.
When talking with Reuters, the spokesperson for New York’s chief financial regulator noted that Paxos failed to administer BUSD in a “safe and sound” manner.
On top of that, the financial regulator reportedly believes that Paxos “violated its obligation to conduct tailored, periodic risk assessments and due diligence refreshes of Binance and Paxos-issued BUSD customers to prevent bad actors from using the platform.”
On February 13th, Paxos issued a press release revealing that it is set to stop minting BUSD tokens on February 21st.
However, the New York State’s Department of Financial Services is not the only regulator looking into Paxos BUSD stablecoin.
On February 12th, the news broke that the US Securities and Exchange Commission issued a Wells Notice to Paxos, claiming that BUSD is a security, and thus, it should be registered as one.
In response to these allegations, Paxos shared a press release noting that it “categorically disagrees” with such claims and was prepared to “vigorously litigate” with SEC if necessary.
