SEC to sue Paxos over Binance stablecoin BUSD: WSJ

As the Wall Street Journal reported on February 12, the U.S. Securities and Exchange Commission (SEC) plans to sue Paxos for violating investor protection laws with Binance stablecoin, BUSD.

Last week, another U.S. regulator, the New York Department of Financial Services (NYDFS), opened an investigation into Paxos. No details were disclosed.

Related: Weekly Digest From TradeCrypto.com #3

The SEC sent Paxos a special notice (Wells Notice), which the regulator uses to notify companies of planned enforcement actions. WSJ says the document names Binance’s USD stablecoin, BUSD, as an unregistered security.

Paxos now has 30 days, starting from receiving the Wells notice. The company should respond with a legal brief (Wells Submission) that includes arguments for why the charges should be dismissed.

SEC spokesperson told Cointelegraph that it “does not comment on the existence or nonexistence of a possible investigation.”

A Binance spokesperson responded to Cointelegraph’s inquiry by stating that BUSD is a “product issued and owned by Paxos” and that Binance only licensed it to promote BUSD. A spokesperson added that Paxos is regulated by the New York Department of Financial Services (NYDFS) and that BUSD is a “1 to 1 backed stablecoin.”

Stablecoins are a critical safety net for investors seeking refuge from volatile markets and limiting their access would directly harm millions of people across the globe. We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.

Related: Binance stablecoin circulating supply continues to decrease

Paxos didn’t comment on the situation when the WSJ report was published.

However, at the time of writing, another WSJ report just came out, and the NYDFS ordered Paxos to stop issuing BUSD. According to a statement from Binance, Paxos will continue to manage redemptions of the product.

FOX Business journalist Eleanor Terrett tweeted on February 12 that the move was a “unilateral effort” by SEC and other regulators to “blitz crypto.” She claimed that more Wells notices would be sent over the coming weeks.