Last Updated on 1 hour by John Piper

Markus Thielen, Matrixport’s head of research, believes that recent scrutiny of Paxos & Binance USD ($BUSD token) is not an attack on stablecoins but rather an issue with Paxos & its oversight of the token.

Thielen’s analysis suggests that Paxos might not have conducted proper risk assessments or due diligence of Binance customers. This led to the New York Department of Financial Services (NYDFS) being prompted to investigate.

Paxos also confirmed recently that it was issued a Wells Notice by the United States Securities and Exchange Commission for failing to register the BUSD offer under federal securities laws. This adds to the growing number of cryptocurrency exchanges and businesses that are under regulatory action by the SEC.

Paxos maintained that BUSD tokens were fully backed 1:1 by US dollars reserves. They are also held in separate, bankruptcy-remote accounts. Binance also reiterated the statement, referring BUSD to as one of most transparent stablecoins.

The recent BUSD actions have raised concerns about the future of stablecoins. Thielen urged industry to not be too concerned, noting that there are no other allegations against Paxos apart from the current BUSD issue. Some of the regulatory actions may have been triggered in part by Binance’s recent incident, when Binance used customer funds to purchase collateral.

In the meantime, due to the investigation and crackdown on Paxos’s activities, Binance has seen an astronomical increase in withdrawals. 342 million BUSD was stolen by customers who took their funds from the exchange over 24 hours.

#PeckShieldAlert ~342M $BUSD have been burned at Paxos Treasury within the last 24 hours, $BUSD MarketCap: $15.8Bhttps://t.co/BMeVokqVE6 pic.twitter.com/hJdnixxbtD

— PeckShieldAlert, @PeckShieldAlert, February 14, 2023

Nansen data also showed that Binance had been withdrawn $788.5 million in 24 hours.

The post Is Paxos really a Paxos lawsuit issue? Coin Insider first published this article.