BUSD Issuer Paxos Faces SEC Lawsuit Over Binance Stablecoin
- The enforcement action revolves around Binance’s BUSD stablecoin which is issued by Paxos.
- The regulator has alleged that BUSD is an unregistered security.
Paxos Trust Company, the issuer of the world’s third-largest stablecoin, is reportedly facing a lawsuit from the Securities and Exchange Commission (SEC). According to a recent report, the crypto firm is being accused of violating investor protection laws over Binance’s BUSD stablecoin.
People familiar with the matter revealed that the SEC’s enforcement department has issued a Wells notice to Paxos. A Wells notice is issued to inform entities of potential enforcement action. The notice alleged that BUSD is an unregistered security.
The BUSD stablecoin was launched by Binance and Paxos in 2019. The stablecoin is owned and issued by Paxos, while the exchange licenses its brand. The dollar-pegged stablecoin is listed by Paxos in several crypto exchanges, including its itBit exchange. BUSD has a market capitalization of over $16 billion.
Data from blockchain analytics firm Nansen shows that nearly 90% of the stablecoin is currently held by Binance, the world’s largest crypto exchange. The exchange said in a statement that it will monitor the situation.
A Wells notice doesn’t necessarily mean that enforcement actions will follow. Recipients of the notice have the option to respond to the SEC and make their case against a lawsuit. Fox journalist Eleanor Terrett revealed that more Wells notices would be issued in the coming weeks.
The Wells notice to Paxos is the latest move in the current crackdown campaign against crypto firms. The past few days have seen multiple U.S. federal agencies coordinating enforcement actions against crypto firms including Kraken and Nexo among others. The increased regulatory scrutiny has forced several platforms to shut down their staking services.