The SEC plans to take action against Paxos over the Binance stablecoin, BUSD, according to a report on February 12, citing ‘people familiar with the matter’.
The WSJ reports that the financial regulator issued a letter to Paxos, known as a Wells notice, to inform it of possible enforcement action. The Wells notice enables companies to explain to the SEC why the agency should not proceed with legal action. This is not the final announcement of enforcement action.
The SEC is making the same allegation it always does with crypto companies – selling unregistered securities, which is what BUSD claims. Furthermore, the agency has not yet targeted a major stablecoin issuer, but is expanding its scope with this latest salvo.
Is there just a security?
Paxos partnered with Binance in 2019 to launch the dollar-pegged exchange-branded stablecoin, which is now the world’s third largest.
The crypto community suggested it was a swipe at Binance as the asset is clearly a stablecoin, not a security.
The SEC claims BUSD is an unregistered security and is suing its issuer Paxos.
To be considered a security, the Howey Test is used… I don’t think BUSD meets the criteria, it is a very stable currency!?
Seems more like a shot at Binance than anything else. pic.twitter.com/9sAuys5GY7
— tedtalksmacro (@tedtalksmacro) February 13, 2023
The SEC didn’t specify whether it had a problem with the company minting the coin or Paxos’ listing of BUSD.
Last week, crypto potato Told that Paxos was being investigated, however, the firm denied that it had been asked by the OCC to withdraw its application for a national trust bank charter.
SEC Chairman Gary Gensler previously commented that stable coins can be similar to bank deposits or money-market mutual funds, but he is now associating them with securities similar to company shares.
Last week, the SEC cracked down on Kraken, also accusing it of selling unregistered securities through its staking service. The US crypto exchange settled for $30 million and pulled the plug on its staking products.
Industry leaders have warned that the SEC is seeking to ban stakes for US retail investors that would lead to services and business overseas (as it did with FTX).
Stablecoin Ecosystem Outlook
The current stablecoin market capitalization is $137 billion, representing 13% of the entire crypto market cap.
Tether (USDT) and Circle (USDC) capture the bulk of the market, with a combined share of around 80%.
Binance is the third largest stablecoin with USD 16.1 billion in circulation and 12% market share. Paxos has its own stablecoin called the Pax Dollar (USDP), according to CoinGecko, and has a supply of $896 million.
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source: cryptopotato.com
