• The US Securities and Exchange Commission (SEC) has issued a Wells Notice to Paxos, alleging that its BUSD stablecoin is an unregistered security.
• New York regulators have ordered Paxos to stop issuing the BUSD.
• The SEC will take legal enforcement action if Paxos continues with the issuance of BUSD.
SEC to Sue Paxos Over BUSD
The US Securities and Exchange Commission (SEC) has issued a Wells Notice to Paxos, alleging that its BUSD stablecoin is an unregistered security. The SEC could take legal enforcement action against the issuer of Binance USD (BUSD) for violating investor protection laws if it does not comply.
Ordered To Stop Issuance
Shortly after the SEC’s notice, the New York Department of Financial Services (NYDFS) reportedly ordered Paxos Trust Co., the issuer of the Binance USD (BUSD), to stop issuing the stablecoin. Despite this, Paxos can continue managing redemptions of the token while awaiting further regulatory actions.
Is The BUSD A Security?
The SEC has been using the Howey Test to determine whether a crypto should be classified as a security or not. This test classifies an asset as a security if there is an investment of money with the expectation of profits derived from someone else’s efforts. Business development and marketing executive Adam Cochran has argued that anything can be called a security due to how vague this definition is.
Binance Reviewing Other Projects
Given these regulatory uncertainties, Binance will review “other projects in those jurisdictions” in order to protect its users from any harm caused by this situation.
Conclusion
The SEC’s Wells Notice warns Paxos Trust Co., the issuer of Binance USD (BUSD), that it could face legal action if it continues with issuance activities without registering as a security first. As per NYDFS orders, PAXOS must immediately stop creating more tokens but may continue managing redemptions until further notice from authorities or other circumstances arise that would render such activities illegal under U.S law or regulation