The United States Securities and Exchange Commission (SEC) is set to sue crypto firm Paxos over Binance USD (BUSD), the official stablecoin of leading crypto exchange Binance.
SEC Goes After BUSD Issuer Paxos
According to a report by the Wall Street Journal that cited people familiar with the matter, the SEC’s enforcement staff has already sent a Wells notice to the crypto firm.
A Wells notice is a formal notice that the SEC sends to companies and individuals when it is planning to bring an enforcement action against them. The notice is issued at the end of an investigation into possible securities law violations.
The securities watchdog is planning to sue Paxos for violating investor protection laws, according to the report.
SEC: BUSD is a Security
The SEC alleges that BUSD, a stablecoin issued and listed by Paxos, is unregistered security. BUSD was developed by Paxos in partnership with Binance in 2019. The stablecoin is backed 1:1 by U.S. dollars and has witnessed increased adoption from many crypto exchanges and investors since its launch four years ago.
According to the report, it is unclear if the SEC is planning to sue Paxos for issuing BUSD or just listing it. If the suit is for listing the stablecoin, the move is expected to have a wider impact on industry firms that have already listed BUSD on their platforms.
Binance had stated that the stablecoin is issued and owned by Paxos and that it only licenses its brand.
“We will continue to monitor the situation,” Binance commented in response to the possible suit.
A Paxos spokeswoman said the company is not “commenting on any individual matter.”
Paxos to Stop Issuing BUSD
Meanwhile, Paxos has also been ordered by the New York Department of Financial Services (NYDFS) to stop issuing BUSD. However, the New York-based firm will continue to manage BUSD redemptions.
The move comes after Coindesk reported last week that Paxos was being investigated by the New York regulator.
