(Kitco News) – The cryptocurrency industry scored an important legal victory on Thursday as the U.S. Securities and Exchange Commission (SEC) announced that they intend to drop their investigation into stablecoin issuer Paxos and the Binance USD (BUSD) stablecoin without filing an enforcement case.
“Paxos, the leading regulated blockchain & tokenization infrastructure platform, today announced that it received a formal termination notice from the SEC on July 9, 2024, stating that it will not recommend enforcement action against Paxos Trust Company in the investigation of Binance USD,” the stablecoin issuer wrote in a press release.
In February 2023, Paxos received an SEC Wells notice claiming that BUSD was an unregistered security and that the platform violated federal securities laws.
At the time, BUSD was the third-ranked stablecoin in the market – boasting a market cap of 16.61 billion – but has since seen its status fall as Paxos announced that it would stop issuing the token shortly after the investigation was announced.
Binance also moved to distance itself from the stablecoin it founded in the wake of the investigation, all but sealing the fate of the token, which now has a market cap of $69.5 million according to CoinMarketCap.
While the SEC has declined to move forward with an enforcement action at this time, they did leave the door open for the issue to be revisited in the future.
According to the July 9 letter from Jorge Tenreiro, acting chief of the SEC’s crypto assets and cyber unit, while the regulator does not “intend to recommend an enforcement action by the Commission against Paxos,” the notice “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.”
In response to the announcement, Paxos defended BUSD and reiterated their position that stablecoins should not be considered securities.
“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,” they wrote. “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.”
“We believe this development will unlock a new wave of stablecoin adoption by leading global enterprises,” they added. “Well-designed stablecoins with strong consumer protections – like those issued by Paxos – will transform the financial system in payments, settlement and remittance use cases. This transformative technology will make the financial system more stable, accessible and transparent.”
They also reiterated their dedication to providing users with safe, legal access to stablecoins that have legitimate backing by assets of value.
“Paxos has and always will prioritize the safety of customer assets,” they said. “Paxos issued stablecoins are always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts. Paxos stands apart as the only issuer to secure regulatory oversight in order to introduce safe solutions that will drive significant innovation across the global financial system.”
