Crypto Company Paxos and the SEC Are Set to Duke It Out in Court
Crypto firm Paxos has said it’s expecting to face charges from the Securities and Exchange Commission (SEC) over its issuance of BUSD, the Binance-centered stable coin. It is believed by the financial agency that the company has been issuing the currency as a non-registered security.
Paxos Will Likely Be Charged By the SEC
The New York state financial regulator has issued a cease-and-desist letter to Paxos claiming that the firm should not be providing investors with access to Binance USD any further. At the time of writing, Paxos’ own stable currency is not affected by the motion.
Changpeng Zhao – the CEO of Binance – explained on Twitter how he learned of the financial agency’s actions against Paxos. He said:
We were informed by Paxos they have been directed to cease minting new BUSD [Binance’s stablecoin] by the New York Department of Financial Services.
Paxos has since put out the following statement regarding the situation:
Effective February 21, Paxos will cease issuance of new BUSD tokens as directed by and working in close coordination with the New York Department of Financial Services… This action does not impact our ability to continue serving new or existing customers, our continued dedication to grow our staff, or fund our business objectives.
This isn’t the first time the SEC has targeted crypto firms in recent weeks. Not long ago, the agency announced it had settled with U.S. cryptocurrency exchange Kraken and would ultimately collect a $30 million fee from the firm. In addition, as part of the settlement, Kraken said it would cease all its present staking activities and services.
Many in the crypto space – including Brian Armstrong, the CEO of rival Coinbase – have taken to social media to say they will do all they can to defend staking. They’ve also said that staking services are not securities.
The SEC charges aimed at Paxos were delivered through what’s called a Wells notice. This informs a company of pending charges before they’re officially filed. It appears the SEC is all set to label BUSD a security. This is the same approach it has taken to so many other U.S.-based crypto firms and trading platforms including Gemini, Kraken, and Genesis.
A spokesperson for Paxos said that the company will fight the charges, claiming:
Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.
Getting in the Way of Progress?
The NYDFS also threw its two cents into the mix, saying:
The department has not authorized Binance-peg BUSD on any blockchain, and Binance-peg BUSD is not issued by Paxos.
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