Paxos is under scrutiny by the SEC over the Binance USD stablecoin, which has been deemed an unregistered security. In response to the Wells Notice, Paxos has intended to engage with the SEC and is willing to litigate the issue if necessary.
Paxos In Hot Water With SEC Over Binance USD Stablecoin
Paxos, the New York-based financial institution and technology company, received a Wells Notice from the U.S. Securities and Exchange Commission (SEC), which warns of a possible enforcement action regarding the Binance USD (BUSD) stablecoin. The SEC claims that BUSD is unregistered security. Paxos has been responsible for the minting and redemption of BUSD since 2019 under an agreement with the exchange.
As per Investopedia, once a Wells Notice is received, the recipient has 30 days to respond through a legal document known as a Wells Submission. This submission provides an opportunity to present arguments against the charges that the accused may face and to persuade the SEC why such charges should not be pursued.
In a press release, Paxos stated that it disagrees with the SEC staff’s position that BUSD is a security under federal securities laws. The Wells notice issued by the SEC only pertains to BUSD, and there are no other allegations against Paxos.
Paxos stated that it has always prioritized the safety of its customers’ assets. BUSD is fully backed 1:1 with US dollar-denominated reserves held in segregated accounts that are remote from bankruptcy. Paxos intends to engage with the SEC staff regarding this matter and is willing to litigate the issue if necessary.
The company is responsible for the management of three assets, including two stablecoins, Pax Dollar (USDP) and Binance USD (BUSD), as well as Pax Gold (PAXG). As per recent estimates, the market capitalization of USDP is approximately $898.16 million, whereas BUSD is valued at around $16.1 billion.
SEC Cracks Down On The Crypto Industry
According to a tweet by FOX Business journalist Eleanor Terrett on February 12th, the action was a unilateral effort by the SEC and other regulators to pursue the crypto industry aggressively. Terrett also suggested that additional Wells notices may be issued in the coming weeks.
Recent reports revealed that Kraken, a crypto exchange, has agreed to pay a fine of $30 million to the SEC for failing to register its crypto asset staking-as-a-service program. On the other hand, the CEO of Coinbase has pledged to defend staking services in a US court.
The SEC faced internal criticism for its actions against Kraken. On February 10th, SEC Commissioner Hester Peirce denounced the agency’s conduct, stating that it was an inefficient and unfair way of regulating. Peirce further criticized the SEC for shutting down a program that had served people well.