SEC Files Lawsuit Against Paxos Over Binance USD Stablecoin
The United States Securities and Exchange Commission (SEC) has stepped up its enforcement against crypto firms, with Paxos Trust Co. and Binance finding themselves under the regulatory microscope.
In a significant development, the SEC has written a letter to Paxos Trust Co., potentially indicating a lawsuit complaint. The Wells notice, a letter issued before the lawsuit enforcement to inform companies or individuals, has been sent to Paxos Trust Co., alleging that they have breached investor protection laws, specifically in relation to the issuance and listing of the stablecoin Binance USD (BUSD).
Paxos Trust Co.'s spokesperson has remained silent on the matter, choosing not to comment. The SEC's investigation focuses on whether Paxos Trust Co. has issued and listed an unregistered security, BUSD. It is currently unclear whether the notice is issued against listing tokens, issuing tokens, or both.
Binance, on the other hand, has responded to the situation. They have stated that they will continue to monitor the situation and that their global users have a wide array of stablecoins available to them. Binance's spokesperson also emphasised that limiting access to stablecoins would directly harm millions of people across the globe.
Binance USD is a stablecoin pegged with the dollar at a 1:1 ratio and currently holds a market cap of over $16 billion, according to CoinGecko. BUSD holds a dominant position in the stablecoin market and is the third largest cryptocurrency. It is important to note that Binance only holds the license rights of tokens for Binance USD, as it is issued and owned by Paxos Trust Co.
The SEC's investigation of Paxos Trust Co. and BUSD is a separate issue from the ongoing investigation of the leading cryptocurrency exchange, Kraken, for offering unregistered securities. The SEC's commissioners assess the response and make decisions by voting.
This latest move by the SEC underscores the growing scrutiny of the crypto industry by regulatory bodies worldwide. As the industry continues to evolve, it is expected that such investigations and enforcement actions will become more frequent.
