Binance's dollar-pegged stablecoin BUSD turned volatile in the wake of regulatory action against its issuer Paxos Trust Co.

Early Monday, BUSD, designed to maintain a 1:1 value with the U.S. dollar, slipped into a discount of 0.9950 against its rival tether (USDT) on Binance, according to data provided by Kaiko. Tether is the world's largest dollar-pegged stablecoin by market value.

The de-pegging to the lowest level in over a year happened after the New York Department of Financial Services ordered Paxos Trust Co, which issues and lists BUSD, to stop minting more of its tokens.

Paxos announced that it would cease the issuance of new BUSD tokens from Feb. 21 and end its relationship with Binance while assuring BUSD holders that every coin is backed by 1:1 with US dollar-denominated reserve. Further, the company will continue to manage redemptions of the product, according to a Binance statement."

The decline in BUSD/USDT pair on Binance suggests some traders are moving money into tether.

(By Omkar Godbole)