As a researcher with experience in the crypto industry, I believe that the SEC’s decision not to pursue enforcement action against Paxos over its Binance USD (BUSD) stablecoin is a significant development. The industry has been waiting for clarification on the regulatory status of stablecoins, and this de-facto admission that they are not securities is a step in the right direction.
The SEC implicitly acknowledged that stablecoins do not fall under the category of securities.
The SEC concluded its probe regarding Paxos, a New York blockchain infrastructure firm, concerning the Binance USD (BUSD) stablecoin they manage.
In February 2023, Paxos was given a Wells Notice from the SEC signaling an investigation and potential legal action. The allegation against the company was that it had facilitated the offering of registered securities through BUSD. Consequently, New York regulatory authorities mandated Paxos to halt the production of new stablecoins. Recently, the SEC has concluded the investigation and dropped the case.
According to the findings from our investigation into Paxos Trust Company, LLC, as of now, we don’t plan to propose any regulatory action by the Securities and Exchange Commission against the company. Jorge Tenreiro, acting head of the SEC’s Crypto Assets and Cyber Unit, penned this letter.
As a researcher involved in the situation, I can share that on Tuesday, we received good news from the SEC in the form of a termination notice. They have decided not to pursue enforcement action against Paxos Trust Company in their investigation into Binance USD (BUSD). You can find a copy of the letter and more details on our website.
— Paxos (@Paxos) July 11, 2024
No repercussions for the SEC?
The Paxos probe is a significant aspect of “Operation Choke Point 2.0,” the Securities and Exchange Commission’s extensive campaign targeting multiple cryptocurrency service providers.
During that period, the SEC took steps against Binance and Coinbase for suspected securities law infringements. As a result, Paxos was compelled to retire the BUSD token and switch it to redeem-only mode, which has been in effect since then, at least until February this year.
The Binance-linked stablecoin, which reached a peak market value of $23 billion, now boasts a meager $70 million in circulation. After the Securities and Exchange Commission (SEC) dropped their investigation, some industry advocates raised concerns about the regulatory body’s harsh tactics.
Despite this, the advancement makes it clearer that stablecoins fall outside the category of securities, potentially bolstering the case for a comprehensive US cryptocurrency regulatory structure.
The stablecoin was forced to halt operations by authorities, causing significant harm to Paxos and Binance with seemingly no justification. Meanwhile, the SEC appears to have incurred no consequences for this action. Such a flawed and biased structure is utterly concerning.
— Aylo (@alpha_pls) July 11, 2024
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2024-07-11 18:00