The New York Department of Financial Services (NYDFS) said in a consumer alert on Feb. 13 that it had ordered Paxos to stop minting Binance USD

The company behind Binance’s stablecoin, Paxos Trust Company, is in talks with the U.S. Securities and Exchange Commission (SEC) after the regulator told the firm it should have registered the token as a security, as per an internal email from Paxos’ CEO.

We are engaged in productive talks with the Securities and Exchange Commission, and we look forward to continuing that dialogue in private, said Paxos CEO Charles Cascarilla in an email to Paxos employees which was seen by Reuters.

He further said that if necessary, Paxos would defend its position that Binance USD is not a security through litigation.

The New York Department of Financial Services (NYDFS) told in a consumer alert on February 13 that it had ordered Paxos to halt minting Binance USD, the third biggest stablecoin with nearly $16bln in circulation.

In turn, Paxos said it would halt issuing new Binance USD from February 21, but would continue to support and redeem the tokens until at least February 2024.

Cascarilla said the firm’s decision to end its connection with Binance was different from the New York Department of Financial Services directive and the communication it has had with the Securities and Exchange Commission over Binance USD.

The market has evolved and the Binance relationship no more aligns with our current strategic priorities, Cascarilla said.

He said that Paxos was still working with the Securities and Exchange Commission towards the publication of its application to procure a clearing agency license, and with the U.S. Office of the Comptroller of the Currency (OCC) to get final approval for its national trust bank charter.

Stablecoins, digital tokens typically supported by traditional assets designed to hold a steady value, have come up as one of the crucial cogs in the crypto economy. They are used for trading between volatile tokens such as bitcoin and, in a few emerging economies, as a means to protect savings against inflation.