SEC is Suing Paxos Over Binance USD: Details
- The SEC has issued a Wells Notice to Paxos, a blockchain payments firm, over Binance USD (BUSD).
- The agency believes that BUSD, a stablecoin owned and issued by Paxos, is an unregistered security.
- A Wells Notice is a letter the SEC uses to tell companies of planned enforcement action.
- The blockchain payments company has 30 days to respond to the notice in a legal brief.
Rumors seeped into the crypto space that US authorities were planning to dry up the banking access of firms like Paxos, a New York-based financial company specializing in blockchain payments. While such rumors were denied, a report has cleared up the fact that the payments firm has been sued by the United States Securities and Exchange Commission (SEC) over the stablecoin of the world’s largest crypto exchange, Binance USD (BUSD).
According to a recent report from the Wall Street Journal (WSJ), people familiar with the matter have confirmed that the SEC issued a Wells Notice to Paxos. It is crucial to note that a “Wells Notice” is a letter the US securities regulator uses to inform companies of planned enforcement action. The report also confirms that the letter alleges that Binance US is an unregistered security.
An important aspect of a Wells notice is that the receiver is given a period of close to 30 days to submit a brief and respond to the accusations mentioned in the notice. This legal brief is known as a “Wells Submission” and includes arguments to prove why the charges should not be brought against prospective defendants.
On the other hand, a spokesperson from the SEC told CoinTelegraph that the agency “does not comment on the existence or nonexistence of a possible investigation.” A spokesperson from leading exchange Binance commented on the accusations of the regulator, adding that the Binance USD is a “Paxos issued and owned product,” with Binance licensing its brand to the firm for use with BUSD.
The spokesperson also added that Paxos is regulated by the New York Department of Financial Services (NYDFS) and that BUSD is backed to the US dollar in a 1:1 ratio.
“Stablecoins are a critical safety net for investors seeking refuge from volatile markets and limiting their access would directly harm millions of people across the globe,” the spokesperson added. “We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.”
Interestingly, Binance USD (BUSD) is the third largest stablecoin by market capitalization, which stands at a value of $16.14 billion. It is issued and owned by Paxos ever since the payments firms partnered with Binance in 2019. Moreover, the New York-based company is also the owner and issuer of the Paxos Dollar (USDP) stablecoin, which debuted in the crypto space in 2018.
Additionally, FOX Business journalist, Eleanor Terrett, tweeted on Feb. 12 that this move was a “unilateral effort” between the SEC and other regulators to “blitz crypto.” Rumors circulated in the market that the Fed and OCC are in the midst of a massive crypto de-banking operation, Paxos and others were told by the OCC to either withdraw their banking charter applications or they would be denied by Friday last week. These rumors were denied by the payments company, but Terrett pointed out that more Wells Notices can be expected in the coming days.
As reported earlier by Bitnation, the SEC also rounded up its case with crypto exchange Kraken, which will have to pay $30 million in disgorgement, prejudgment interest, and civil penalties. The regulator claimed that Kraken’s staking services were unregistered securities.