The SEC sent Paxos a Wells notice — a notification of pending enforcement action — claiming that stablecoin Binance USD (BUSD) is an unregistered security. Paxos has managed the minting and redemption of BUSD under an agreement with the exchange since 2019.
The New York Department of Financial Services (NYDFS) later directed Paxos to cease issuance of new BUSD tokens, effective Feb. 21.
A Paxos spokesperson told Blockworks in a statement that the company “categorically disagrees” with the SEC, adding that BUSD is not a security under the federal securities laws. The SEC Wells notice pertains only to BUSD, according to the representative, considering that there are no other allegations against Paxos.
“Paxos has always prioritized the safety of its customers’ assets. BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,” the spokesperson said. “We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.”
A Binance spokesperson told Blockworks the BUSD market capitalization, which was about $16 billion as of 5 pm ET Monday, is expected to decrease in the near term. Binance CEO Changpeng Zhao tweeted Monday that he expects users will soon migrate to other stablecoins on Binance.
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