Paxos settles NYDFS charges for $48.5 million over BUSD partnership

Paxos has agreed to a $48.5 million settlement with New York state regulators over its involvement in the Binance USD (BUSD) stablecoin, marking the resolution of a high-profile legal dispute. The New York Department of Financial Services (NYDFS) accused Paxos of failing to perform adequate due diligence when entering a partnership with Binance in 2020 to issue the BUSD token. As part of the agreement, Paxos will pay a $26.5 million fine and invest an additional $22 million into enhancing its compliance infrastructure [1].

The NYDFS alleged that Binance did not meet anti-money laundering requirements, a claim that intensified regulatory scrutiny of BUSD in late 2022. This period also saw the U.S. Securities and Exchange Commission (SEC) investigate whether BUSD constituted an unregistered security. In February 2023, New York regulators ordered Paxos to cease minting new BUSD tokens, which led to a significant decline in the token’s circulation as redemptions continued [1].

At its peak, BUSD had reached a circulation of over $23 billion and ranked among the top three stablecoins globally. However, the regulatory pressures and operational changes caused the token’s usage to wane. Around the same time, Binance itself began to disengage from the BUSD project, signaling a broader shift in its strategic approach to stablecoin offerings [1].

The settlement occurs in the context of evolving U.S. regulatory attitudes toward cryptocurrency. The Trump administration has seen the appointment of pro-crypto officials to key regulatory roles, including SEC Chairman Paul Atkins. As part of this shift, the SEC concluded its own investigation into Paxos and BUSD in July 2024, suggesting a broader easing of enforcement pressure on the firm [1].

Paxos, which also issues PYUSD, has continued to expand its stablecoin offerings, including the launch of USDG, a stablecoin compliant with the EU’s Markets in Crypto-Assets (MiCA) regulation. These moves reflect the company’s efforts to adapt to a rapidly changing regulatory landscape [1].

Source: [1] [Paxos pays $48.5m to settle NY charges over Binance USD](https://coinmarketcap.com/community/articles/6894c9f0277009333412b61c/)