According to recent reports, sources suggest that the Securities and Exchange Commission (SEC) is planning to take action against Paxos over the stablecoin BUSD.
Reports state that the SEC issued a letter to the agency known as the “Wells notice,” which seeks to inform it of a possible enforcement action. The notice enables firms to respond to the regulator with an explanation as to why the agency shouldn’t proceed with legal action. Hence, it is not a final declaration of enforcement action.
The SEC is alleging the firm is selling unregistered securities, something it has already done with many crypto companies. Furthermore, the agency has yet to target a large stablecoin issuer but is broadening its scope with this latest salvo.
As per sources, Paxos partnered with Binance in 2019 to launch the dollar-pegged exchange-branded stablecoin, BUSD, which is now the world’s third-largest. However, the crypto community sees this as a biased move against the companies since the asset is a stablecoin, not a security.
Notably, the SEC did not specify whether it had an issue with the company minting the coin or Paxos’ listing BUSD. Last week, Todayq News reported that Paxos was under investigation; however, the firm denied that it was asked to withdraw its application for a national trust bank charter from the U.S. Office of the Comptroller of the Currency (OCC).
Gary Gensler, the chairman of the SEC, previously commented that stablecoins could resemble bank deposits or money-market mutual funds. Still, he appears to be combining them with securities akin to company stocks.
Last week, the SEC came down hard on Kraken, accusing it of selling unregistered securities through its staking services. The U.S.-based crypto exchange settled $30 million and pulled the plug on its staking products.
Sources reveal that the industry leaders have warned that the SEC is trying to ban staking for U.S. retail investors who will push services and trade overseas. Notably, the regulator did this with FTX, the collapsed crypto exchange.
As per data, the current stablecoin market capitalization is $137 billion, which accounts for 13% of the entire crypto market capitalization. Out of this, Tether (USDT) and Circle (USDC) cover the most significant share of around 80%. BUSD is the third largest stablecoin, with $16.1 billion in circulation and a market share of 12%. Paxos has its stablecoin called the Pax Dollar (USDP), with a supply of $896 million.