The U.S. Securities and Exchange Commission (SEC) has reportedly sent a Wells notice to the Paxos Trust Co. Citing investor protection laws’ violations, the SEC alleges that a Paxos-issued digital asset, Binance USD, is an unregistered security. The SEC’s Wells notice reportedly tends to intimate companies and individuals of a potential enforcement action.
Breaking the news, Chinese reporter Colin Wu (@WuBlockchain) tweeted:
Beaking: U.S. SEC has told Paxos Trust Co. that it plans to sue the company for violating investor protection laws. The notice alleges that Binance USD, a digital asset that Paxos issues and lists, is an unregistered security. WSJ https://t.co/xB3ctLwsyJ
— Wu Blockchain (@WuBlockchain) February 12, 2023
BUSD is a US dollar-pegged stablecoin with a one-to-one ratio. Binance and Paxos’ partnership commenced in 2019. itBit, a digital asset exchange operated by Paxos, lists BUSD, as well; BUSD is also listed by various other exchanges. It is still unclear if the SEC notice in question particularly relates to the BUSD issuance by Paxos, its listing or both.
A Paxos company spokeswoman said, Paxos is not commenting on any individual matter.
Binance maintains that BUSD is a Paxos-issued and owned stablecoin—that Binance merely licenses the BUSD brand. The world’s largest cryptocurrency exchange says,
We will continue to monitor the situation.
In essence, firms receiving a Wells notice still have a say in drafting a written response to argue as to why the SEC shouldn’t file a lawsuit. It must be noted that Wells notices in no way mean a confirmed SEC enforcement action. To initiate an enforcement settlement or litigation post-Wells notice, an authorization vote from the five SEC commissioners is a must.
The U.S. SEC boosted its special enforcement unit focused on the cryptocurrency market in 2022, aiming to focus on stablecoins.
BUSD reportedly is the third-largest stablecoin of the world, having a $16 billion market cap, at press time, per CoinGecko. Paxos’ own stablecoin, Pax Dollar, has a $899 million market cap, at press time, per CoinGecko.
