Paxos Trust Co. announced that the U.S. Securities and Exchange Commission (SEC) has concluded its investigation into the company’s former Binance-branded stablecoin, Binance USD (BUSD).
TakeAway Points:
- The SEC has concluded its investigation of Paxos’ stablecoin BUSD, which is branded under the Binance name, and no enforcement action is suggested.
- Paxos received notification from Wells more than a year ago that BUSD was an unregistered security.
- The Department of Financial Services for the State of New York has already ordered Paxos to stop creating additional BUSD tokens.
SEC concludes Paxos Investigation
According to the report, the SEC will not recommend any enforcement action against Paxos, marking a notable victory for the stablecoin issuer. This decision comes over a year after Paxos received a Wells notice from the SEC, which indicated the regulator’s intent to investigate whether BUSD was an unregistered security.
The SEC’s Investigation on Paxos
The investigation into Paxos began in February 2023, when the company received a Wells notice from the SEC. The notice suggested that the SEC was considering recommending an action alleging that BUSD was a security and that Paxos should have registered the offering under federal securities laws.
At the time, BUSD was the third-largest stablecoin in the crypto market, with approximately $16 billion in circulation. In August 2023, the New York State Department of Financial Services directed Paxos to stop issuing new tokens of BUSD, further complicating the situation for the stablecoin issuer.
Paxos has consistently maintained that its USD-backed stablecoins are not securities under federal securities laws.
“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified. We are proud of our relentless advocacy for stable-value digital assets and that the SEC staff determined it will not bring enforcement action against Paxos in connection with BUSD,” a spokesperson for Paxos stated.
How this may affect the Crypto Market
The SEC’s decision to drop the investigation into Paxos and BUSD has broader implications for the cryptocurrency market. According to a report by Fortune, this move signals that the SEC may not consider stablecoins as securities, which could influence future regulatory decisions regarding other digital assets.
However, Binance has urged caution, stating, “This decision marks a significant development in the ongoing discussions surrounding the classification of digital assets. The SEC’s decision to halt its investigation into Paxos and its ruling on BUSD could potentially influence future regulatory decisions regarding other digital assets. However, it is important to note that the SEC’s decisions are subject to change and may not necessarily set a precedent for future cases.”
The conclusion of the investigation is a positive development for Paxos and the broader crypto industry, as it removes a significant regulatory overhang. It also provides a clearer regulatory framework for stablecoins, which are crucial for the functioning of the crypto market. The decision could pave the way for more stablecoin issuers to operate with greater regulatory certainty, potentially leading to increased adoption and innovation in the space.
