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12/07/24
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U.S. SEC Changes Its Mind About Potential Enforcement Action Against Paxos Over BUSD
On July 11, Paxos published a press release noting that the U.S. Securities and Exchange Commission (SEC) has formally terminated its Wells notice which stated potential enforcement action against the firm.
According to the SEC, on July 9, there will be no recommendation of enforcement action against Paxos Trust Company regarding investigations into Binance USD (BUSD). Last year, the commission sent a Wells notice to the blockchain and tokenization infrastructure company alleging that BUSD was an unregistered security and that it violated federal securities laws.
According to Paxos’ press release yesterday, “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.”
This comes after several court rulings against the SEC, including those related to tokens considered securities. In the commission’s case against Ripple Labs, a federal judge ruled that the XRP token was not a security last year, with another judge in the case against Binance citing the Ripple ruling to dismiss a claim associated with BUSD.
In February 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop minting new Binance USD (BUSD) stablecoins. The firm announced that it will cease issuance of new BUSD tokens as directed by and is working in close coordination with the NYDFS.
The firm believes that the SEC dropping potential enforcement action will facilitate new stablecoin adoption and that well-designed stablecoins with strong consumer protections will ensure the transformation of the financial system in payments, settlement and remittance use cases.
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