The United States Securities and Exchange Commission (SEC) has reportedly informed stablecoin issuer Paxos Trust Co. of the lawsuit over the investor protection laws breach relating to Binance USD.
The SEC issued a Wells Notice to Paxos to inform them of impending enforcement action. Reportedly, the notice claims that Binance USD is an unregistered security.
According to Investopedia, after receiving a Wells Notice, the accused has 30 days to react with a legal brief known as a Wells Submission, which explains why the charges should not be pressed against potential defendants.
According to an SEC spokesman, the agency does not comment on the presence or absence of a potential inquiry.
A spokesman for Binance stated that BUSD is a product issued and held by Paxos, with Binance licensing its name for use with BUSD. It claimed that the New York Department of Financial Services (NYDFS) regulates Paxos and that BUSD is a “1-to-1 backed stablecoin.”
The representative further added that stablecoins are a crucial safety net for investors seeking sanctuary from unpredictable markets, and restricting their access would directly hurt millions of individuals worldwide. “We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.”
Paxos is the owner and issuer of BUSD, a U.S. Dollar-backed stablecoin that has existed since the company’s September 2019 agreement with crypto exchange Binance. As the third biggest stablecoin, it has a current market capitalisation of about $16 billion. Paxos is also the inventor of the Paxos Dollar (USDP) stablecoin and itBit digital asset exchange.
Eleanor Terrett, a FOX Business writer, tweeted on February 12 that the action was a unilateral effort by the SEC and other agencies to “blitz crypto” and that more Wells notices are anticipated to be issued in the coming weeks.
Another step in the unilateral effort between the @SECGov, @NYDFS and @USOCC to blitz crypto. More Wells notices going out in the coming 2-3 weeks, I’m told.
Keep an eye on @JunoFinanceHQ. https://t.co/u4Q3pHN2lH
— Eleanor Terrett (@EleanorTerrett) February 13, 2023
The agency announced a $30 million settlement with Kraken on February 9 for failing to register its crypto staking program, which the SEC deemed a security. After the move, SEC Chairman Gary Gensler warned crypto businesses to “come in and follow the law.”
The SEC received internal criticism for its stance against Kraken. On February 10, SEC Commissioner Hester Peirce stated that the SEC’s action “is not an efficient or fair way of regulating” and criticised the agency for terminating a “program that has served people well.”
Last week, the NYDFS was investigating Paxos, for which the reason remained unknown.