The New York State Department of Financial Services has directed a crypto firm, Paxos Trust Co., to halt the issuance of Binance USD (BUSD), one of the largest dollar-pegged cryptocurrencies. This move is part of the government’s wider crackdown on the sector. Despite the halt in issuance, Paxos will continue to manage redemptions for the product, as stated by Binance in a statement.

BUSD, also known as Binance USD, is a stablecoin backed by a one-to-one ratio of US dollars. Binance and Paxos launched the stablecoin in 2019 with approval from New York’s financial regulator. The company claims that BUSD is issued and owned by Paxos, with Binance only licensing its brand. As of February 13, 2023, Binance’s website reports 6.2 million holders of BUSD.

Companies like Paxos have benefited from steady revenue streams by issuing stablecoins and investing their clients’ cash deposits in short-term US Treasuries, which have produced higher yields as the Federal Reserve increased interest rates.

Binance USD has become the third-largest stablecoin by market capitalization. With the discontinuation of its issuance by Paxos, the market cap is expected to decline from its Monday level of around $16 billion. The stablecoin was trading close to its $1 value in the early hours of Monday.