Paxos in "constructive discussions" with the SEC regarding BUSD stablecoin issuance
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(Kitco News) - Stablecoin issuer Paxos, which is responsible for issuing Binance’s BUSD stablecoin, has reportedly been in “constructive discussions” with the U.S. Securities and Exchange Commission after the regulating agency issued a Wells notice to the company saying that it should have registered the token as a security.
According to a report from Reuters, CEO Charles Cascarilla sent an email to Paxos employees on Saturday informing them of the most recent developments.
"We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private," Cascarilla wrote, adding that if necessary, Paxos would defend its position that Binance USD is not a security through litigation.
Both the SEC and Paxos have declined to comment on the developing situation.
Last week, the New York Department of Financial Services (NYDFS) ordered Paxos to halt minting BUSD following an investigation by the NYDFS and the SEC that lasted through the November collapse of crypto exchange FTX.
Binance has since sought to distance itself from the situation, with the exchange’s CEO Changpeng Zhao (CZ) saying that BUSD is a Paxos product and the regulator’s actions had nothing to do with the exchange.
“We were informed by Paxos they have been directed to cease minting new BUSD by the New York Department of Financial Services (NYDFS),” he wrote. “Paxos is regulated by NYDFS. BUSD is a stablecoin wholly owned and managed by Paxos.” He also added that “The lawsuit is between the US SEC & Paxos.”
U.S. regulators take a very different view on the subject as the wording of the NYDFS statement on their action suggests that the regulators saw Binance and not Paxos as the bad actor in this.
According to the NYDFS, while they “authorized Paxos to issue BUSD on the Ethereum blockchain,” they did not authorize “Binance-Peg BUSD on any blockchain, and Binance-Peg BUSD is not issued by Paxos.” This directly contradicts CZ’s assertion that Paxos is solely responsible for all BUSD.
Following the order from the NYDFS, Paxos agreed to stop issuing new BUSD as of Feb. 21 but will continue to support and redeem tokens until at least February 2024.
|Binance's forced USDC conversion, insufficient reserves killed BUSD|
According to Cascarilla, the company's decision to end its relationship with Binance was separate from both the NYDFS directive and the communication it had with the SEC over BUSD.
"The market has evolved and the Binance relationship no longer aligns with our current strategic priorities," he said. "We remain fully focused on serving the end holders of BUSD and protecting them from undo harm. Paxos will continue to support BUSD through at least February 2024 and maintain the highest standards of security and soundness in the stablecoin market."
Binance has declined to respond to further requests for comment but has signaled that it will continue to support BUSD for the foreseeable future.
Paxos continues to work with the SEC on its application to obtain a clearing agency license, Cascarilla said, and is also working with the U.S. Office of the Comptroller of the Currency (OCC) to get final approval for its national trust bank charter. The stablecoin issuer has facilitated more than $2.8 billion in BUSD redemptions since announcing that it would stop issuing the token.