The SEC is probing Paxos in relation to the Binance USD stablecoin, which it has determined to be an unregistered security. Paxos has anticipated dealing with the SEC in response to the Wells Notice and is prepared to escalate the matter to court if necessary.
Paxos Faces Possible Enforcement Action By SEC Over BUSD Stablecoin
The U.S. Securities and Exchange Commission (SEC) sent Paxos, a financial institution and technology corporation with headquarters in New York, a Wells Notice alerting it to potential enforcement action against the Binance USD (BUSD) stablecoin. According to the SEC, BUSD is allegedly unregistered security. Since 2019, Paxos has been responsible for minting and redeeming BUSD under an agreement with the exchange.
According to Investopedia, after receiving a Wells Notice, the recipient has 30 days to respond in writing via a Wells Submission. This submission allows the accused to defend themselves against potential accusations and persuade the SEC that no further action should be taken.
Paxos stated that it disagrees with the SEC staff’s assessment that BUSD qualifies as a security under federal securities laws in a press release. There are no other claims against Paxos, and the SEC’s Wells notice exclusively relates to BUSD.
The safety of its users’ assets has always been a top priority for Paxos, and BUSD is fully backed 1:1 with US dollar-denominated reserves stored in segregated accounts far from insolvency. Paxos plans to discuss this topic with the SEC staff and is prepared to take the matter to court if necessary.
Three assets are managed by the firm, including Pax Dollar (USDP) and Binance USD (BUSD), two stablecoins, and Pax Gold (PAXG). According to recent estimates, BUSD has a market capitalization of about $16.1 billion, compared to $898.16 million for USDP.
SEC Takes Action Against Crypto Industry
On February 12th, FOX Business reporter Eleanor Terrett tweeted that the action was a unilateral attempt by the SEC and other officials to pursue the cryptocurrency sector aggressively. Terrett added that more Wells letters might be sent out in the upcoming weeks.
According to recent reports, the crypto exchange Kraken has agreed to pay the SEC a $30 million punishment for failing to register its program and providing for staking crypto assets as a service. The CEO of Coinbase has vowed to defend staking services in a US court, on the other hand.
Internal disapproval of the SEC’s measures against Kraken was raised. Hester Peirce, an SEC commissioner, criticized the agency’s actions on February 10 and said they were an ineffective and unfair regulation method. Peirce criticized the SEC for ending a program beneficial to consumers.
