SEC Sues Paxos Trust Co over Binance USD
2023.02.13 02:10
SEC Sues Paxos Trust Co over Binance USD
By Tiffany Smith
Budrigannews.com – According to reports, the stablecoin issuer Paxos Trust Co. has been informed by the Securities and Exchange Commission (SEC) of its intention to sue the company for violating investor protection laws in relation to Binance USD (BUSD).
A Wells Notice, a letter that the SEC uses to inform companies of planned enforcement action, was issued to Paxos, according to a report in The Wall Street Journal on February 12 that cited people who were familiar with the situation.
According to the individuals, the notice asserts that Binance USD is an unregistered security.
According to Investopedia, the accused has 30 days to respond to a Wells Notice by filing a legal brief known as a Wells Submission with arguments demonstrating why the charges should not be brought against potential defendants.
“Does not comment on the existence or nonexistence of a possible investigation,” an SEC spokesperson told Cointelegraph.
BUSD is a “Paxos issued and owned product,” according to a Binance spokesperson, and Binance licensed its brand to Paxos for use with BUSD. It added that BUSD is a “1 to 1 backed stablecoin” and that Paxos is regulated by the New York Department of Financial Services (NYDFS).
The spokesperson continued, “Stablecoins are a critical safety net for investors seeking refuge from volatile markets, and restricting their access would directly harm millions of people worldwide.” We will keep an eye on the situation. There are numerous stablecoins available to our global users.
Cointelegraph sought clarification from Paxos, but the company did not immediately respond.
Since the company formed a partnership with crypto exchange Binance in September 2019, Paxos has been the owner and issuer of BUSD, a U.S. Dollar-collateralized stablecoin. With a market cap that exceeds $16 billion at the moment, it is the third largest stablecoin.
Paxos is also behind the stablecoin Paxos Dollar (USDP), which went live in 2018, and the digital asset exchange itBit, which it launched in 2012 alongside Paxos’s founding.
Eleanor Terrett, a reporter for FOX Business, posted a tweet on February 12 claiming that additional Wells notices are anticipated to be sent in the coming weeks and that the move was a “unilateral effort” between the SEC and other regulators to “blitz crypto.”
Another step in the unilateral effort to blitz crypto by the @SECGov, @NYDFS, and @USOCC. I’m told that Wells will send out additional notices in the next two to three weeks.
The SEC’s latest apparent crackdown on crypto-related businesses is represented by the reported action.
The SEC settled with crypto exchange Kraken for $30 million on February 9 after the latter failed to register the SEC’s claim that the crypto staking program was a security. SEC Chair Gary Gensler advised crypto firms to “come in and follow the law” following the action.
The SEC received criticism for its actions against Kraken from within. Hester Peirce, the SEC’s commissioner, blasted her own agency for shutting down a “program that has served people well” on February 10. She said the SEC’s behavior “is not an efficient or fair way of regulating.”
Last week, there were also reports that the NYDFS was looking into Paxos. However, the exact reason for the investigation is currently unknown.
