Paxos, the stablecoin issuer, is currently in discussions with the United States Securities and Exchange Commission (SEC) regarding the Binance USD (BUSD) stablecoin. This comes after the financial regulator sent a Wells notice to Paxos. According to a report by Reuters on February 21st, the talks between Paxos and the SEC are “constructive” and will continue in private.
This latest development in the Paxos-BUSD saga follows the SEC’s lawsuit against Paxos, in which the regulator alleged that BUSD was an unregistered security. Paxos CEO Charles Cascarilla has reportedly stated that the company is considering defending its position that BUSD is not a security through litigation.
On February 13th, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD. The company announced that it would stop minting the stablecoin starting from February 21st. Following the notice by the NYDFS, Binance CEO Changpeng “CZ” Zhao disavowed BUSD.
The SEC’s move against Paxos is just the latest in a series of enforcement actions taken by the regulator against companies operating in the crypto industry. On February 9th, the SEC announced that it had reached an agreement with Kraken, in which the company agreed to pay $30 million and stop offering staking services or programs to US clients.
It is not entirely clear what prompted the NYDFS to order Paxos to stop issuing BUSD. However, some reports suggest that the investigation may have stemmed from a complaint made by Circle to the state regulator regarding Binance’s reserves. The news around BUSD has also prompted a surge of withdrawals from Binance, with roughly $2.7 billion in outflows recorded between February 12th and 13th.
In summary, the discussions between Paxos and the SEC regarding BUSD are ongoing and said to be constructive. Paxos is considering defending its position that BUSD is not a security through litigation. The SEC’s lawsuit against Paxos is the latest in a series of enforcement actions taken by the regulator against companies operating in the crypto industry. The NYDFS ordered Paxos to stop issuing BUSD on February 13th, and the company announced that it would stop minting the stablecoin from February 21st. The investigation into Paxos may have been prompted by a complaint made by Circle to the NYDFS regarding Binance’s reserves.
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