SEC to Sue Paxos Over Binance USD Token

According to reports by the Wall Street Journal, the SEC is planning to sue the stablecoin issues Paxos over Binance USD.

Reports by the Wall Street Journal, indicate the United States Securities and Exchange Commission (SEC) intends to sue the stablecoin issuer Paxos Trust Co. for violating investor protection laws relating to its Binance USD (BUSD) token. Paxos, which issues the Pax dollar (USDP) and BUSD, is also under investigation by the New York Department of Financial Services (NYDFS). While the SEC alleges that BUSD is an unregistered security, the scope of the NYDFS’s investigation is unclear.  

Paxos Halts Minting of New BUSD Tokens

According to reports, following the news of the SEC’s intention to sue, the stablecoin issuer said it would halt the minting of new BUSD tokens. A spokesperson for Binance told news outlet CoinDesk:

BUSD is a stablecoin wholly owned and managed by Paxos. As a result, the BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow-up with additional information as required. Paxos also assured the funds are safe, and fully covered by reserves in their banks.

Adding,

Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm.

SEC Criticized by Its Members Over Its Attitude to Crypto

The news of the SEC’s intention with Paxos comes just days after it settled charges with crypto exchange Kraken. During a closed-door meeting held last week, Kraken agreed to pay $30 million in penalties to the SEC and shutter its staking business. The regulator argued that the exchange’s staking program “was an unlawful offer and sale of securities.”

Following the news of the settlement between the SEC and Kraken, Hester Peirce, one of the current four SEC commissions serving under the chairmanship of Gary Gensler, shared her thoughts and “dissent” regarding the settlement. Peirce, who has always defended her right to maintain her own views, shared on the SEC’s website a statement calling the agency “hostile to crypto.”

Peirce argued that Kraken had been the target of the SEC’s regulatory action because its staking program should have been registered with the agency as a securities offering. She was, however, not speaking to whether the program was or wasn’t a security, but did say in the current environment for crypto at the SEC, for Kraken to obtain registration for its program would be extremely difficult.

Opinion

Although this is only the opinion of one of its own commissioners, the SEC should take cognizance of Peirce’s statements. If one of its own members has critique to deliver, going as far as to call the agency “lazy and paternalistic,” the agency should maybe take a step back and reconsider if its current approach to crypto regulation is achieving very much but for to scare investors away from the space. Ultimately, the agency must remember that its duty is to protect investors, not enforce companies to a point where they may decide to remove themselves from the space entirely.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.