On Monday, news of the United States Securities and Exchange Commission (SEC) issuing a notice to the crypto firm Paxos regarding the stablecoin BUSD surfaced.
Sources suggest that the regulator plans to execute an enforcement action against the entity based on the charge that its BUSD constitutes an unregistered security. BUSD is a stablecoin branded by Binance pegged to the U.S. dollar.
In recent action, the stablecoin issuer has acknowledged the “Wells notice” from the regulator hinted at a possible enforcement action in the near future. However, the firm “categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.”
Paxos claimed that the entity is “always backed 1:1 with U.S. dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.” The firm showed significant confidence and highlighted that “it is also prepared to litigate if necessary vigorously.”
In its press release, the firm explicitly mentioned that the “Wells Notice” from the SEC connected only with the stablecoin BUSD and not with any other part of the business. It said:
This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos.
On Friday, Todayq News reported that the regulatory bodies in the U.S. have ganged up against the firm. Simultaneously, the New York Department of Financial Services (NYDFS) started the investigation of Paxos. The regulatory body said, “the department is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers and the institutions themselves from the crypto market volatility we are experiencing.”
Furthermore, there have been reports of the Office of the Comptroller of the Currency (OCC), a federal bank regulator, asking Paxos to withdraw its application for a national trust bank charter. However, on Thursday, the company refuted the rumors.
In particular, the SEC is ambitious toward regulating the crypto sector in 2023. Last week, the Division of Examinations of the SEC announced the list of topics that are a priority for this year. The regulator named “crypto assets” and other evolving technologies as one of the top priorities for this year.
Todayq News reported in January that the SEC brought a record number of crypto-related enforcement actions last year. Figures from 2022 have been about 50% up from 2021. In 2022, SEC had about 30 crypto-related enforcement actions, close to 2020, when it brought 29 such actions. The firm stated that the most common allegations amongst these actions were fraud and unregistered securities.1`