New York ordered Paxos to stop minting Binance USD

On February 13, 2023, Paxos Trust said it would stop issuing new Binance USD, or BUSD, after the New York State Department of Financial Services directed the regulated trust company to halt minting. Paxos set February 21 as the cutoff and said it was ending its relationship with Binance for the branded stablecoin.

The action mattered because it put a supply ceiling on one of crypto’s largest dollar tokens. BUSD was used as a trading quote, settlement asset and collateral across centralized and decentralized markets. Once new issuance ended, redemptions could shrink the outstanding supply, but no authorized Paxos mint could replace redeemed tokens. The announcement therefore changed BUSD from a growing payment and market instrument into one headed for contraction, even though existing tokens remained transferable and redeemable.

What the order did—and did not do

Paxos said it would continue managing the reserves behind existing BUSD and support redemption by eligible customers through at least February 2024. Customers onboarded by Paxos could redeem for U.S. dollars or convert BUSD into Pax Dollar, another Paxos-issued stablecoin. Paxos described its BUSD reserves as fully segregated, bankruptcy-remote and backed one-for-one by dollar-denominated assets.

Those were issuer statements, not an independent Coinburn audit. The February 13 development stopped future issuance; it did not cancel existing tokens, freeze trading or establish that BUSD had lost its dollar backing. Nor was the New York directive a court judgment. At that point, the public record did not resolve every supervisory issue behind the order.

The state action was also separate from the federal securities question disclosed around the same time. Paxos confirmed on February 13 that Securities and Exchange Commission staff had sent it a Wells notice concerning BUSD. A Wells notice signals a possible staff recommendation, not a filed lawsuit or a finding that the token was a security. Paxos disputed the staff position. Coinburn’s February 12 archive treats disclosure of that notice as a separate event.

The event-day market scale

CoinMarketCap’s historical snapshot for February 13 ranked BUSD seventh among crypto assets. The aggregator listed 15,873,279,860 BUSD in circulating supply, a market capitalization of $15.86 billion, a price of $0.9994 and $13.15 billion of volume over the preceding 24 hours.

Those figures describe the scale of the instrument, not an official closing auction. Crypto trades continuously, CoinMarketCap aggregates multiple markets, and the snapshot page does not state the precise observation time or provide venue-by-venue composition. The reported price was close to the intended one-dollar value, but it cannot prove that every venue maintained the same price or that every holder could redeem on identical terms. The market data also cannot, by itself, attribute trading activity to the regulatory announcement.

The institutional signal was clearer than any single price move. New York supervision had reached beyond reserve composition to the issuer’s oversight of a commercial partner whose brand and exchange distribution were central to the product. For other stablecoin issuers and exchanges, that showed that a regulated token could face restrictions based not only on the assets backing it, but also on governance, compliance and partner oversight.

Later clarification

In a notice dated April 11, 2023, NYDFS said unresolved issues involved Paxos’s oversight of its Binance relationship. The agency distinguished Paxos-issued BUSD on Ethereum, which it had authorized, from Binance-Peg BUSD on other blockchains, which it had not. NYDFS also said it was monitoring redemptions and that existing Paxos-issued BUSD could still be listed or exchanged by its licensees.

That later notice clarifies the regulator’s rationale and product boundary. It should not be read backward as evidence that every detail was public on February 13. The defensible event-day conclusion was narrower: New York had ordered the end of new Paxos-issued BUSD minting, Paxos had scheduled an orderly redemption period, and a major piece of crypto’s dollar infrastructure had entered a managed wind-down.