Coinbase (NASDAQ:COIN) has announced via Twitter that it will cease trading in Binance USD (BUSD) on March 13, 2023.
We regularly monitor the assets on our exchange to ensure they meet our listing standards. Based on our most recent reviews, Coinbase will suspend trading for Binance USD (BUSD) on March 13, 2023, on or around 12pm ET.
— Coinbase Assets (@CoinbaseAssets) February 27, 2023
Coinbase provided its standard statement on the stablecoin, “We regularly monitor the assets on our exchange to ensure they meet our listing standards. Based on our most recent reviews, Coinbase will suspend trading for Binance USD (BUSD).”
The decision follows the announcement that Paxos, the digital asset firm that manages BUSD, would exit its relationship with Binance.
At that time, Paxos did not provide a reason as to why it was halting BUSD issuance. In a series of Tweets by Binance founder and CEO Chengpeng “CZ” Zhou, he claimed that Paxos was told to stop minting BUSD by the New York Department of Financial Services (NYDFS) – the entity that regulates Paxos.
Paxos did state that all BUSD tokens issued “have and always will be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.”
Last December, Paxos defended BUSD, stating:
“BUSD is compliant with NYDFS stablecoin virtual currency regulatory guidance – all BUSD tokens are fully backed by US cash & cash equivalents at all times, all reserve assets are held fully segregated & bankruptcy-remote from Paxos corporate assets, Paxos follows clear & tested redemption policies, and an independent third-party attests to our reserves on a monthly basis. The NYDFS oversees our BUSD operations and regularly examines our financial statements, processes and BSA/AML compliance practices. Additionally, along with its third-party attestations, Paxos provides monthly reserve transparency reports that outline the exact US Treasuries Paxos holds backing BUSD. BUSD is undoubtedly the safest, most liquid and comprehensively regulated stablecoin available today.”
Last week, it was reported that Paxos was in discussion with the Securities and Exchange Commission regarding BUSD. The SEC has claimed in the past that stablecoins are securities and should be regulated under securities law. Paxos CEO and founder Charles Cascarilla told Reuters:
“We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private.”
Regarding Coinbase, it already has a deep relationship with Circle’s dollar-based stablecoin USDC so it is probably just exiting a risky relationship as policymakers sort things out regarding digital dollars.