Binance doesn't have to come up with anything, it is a white label solution managed by Paxos.
Paxos issues one, and Binance issues the other.
I'm almost certain that there's only BUSD [1], issued by Paxos. What would be the other version?
[1] https://etherscan.io/token/0x4Fabb145d64652a948d72533023f6E7...
There are two different BUSDs, one by Paxos on the Ethereum netowrk and one is a BUSD based derivative on other chains such as BSC.
https://www.binance.com/en/blog/ecosystem/understanding-busd...
As far as I understand this, this is "just" wrapping/bridging – "just" in quotation marks because that often does carry counterparty risk if not done in a trustless way.
Is the issue that Binance is acting as a secondary custodian (holding Ethereum BUSD, issuing BSC BUSD) for a Paxos-issued (holding USD, issuing Ethereum BUSD) asset, and that that activity is not regulated by the NYDFS?
>Is the issue that Binance is acting as a secondary custodian (holding Ethereum BUSD, issuing BSC BUSD) for a Paxos-issued (holding USD, issuing Ethereum BUSD) asset, and that that activity is not regulated by the NYDFS?
yes
to make matters worse, AFAIK there is also revenue share beteween the two