- February 13, 2023
- Posted by: admin
- Category: BitCoin, Blockchain, Cryptocurrency, Investments
Paxos Trust Company is on the hit list of the US Securities and Exchange Commission, who is out to slap the financial institution and technology company specializing in blockchain with a court case for allegedly violating investor protection laws in issuing Binance USD (BUSD) stablecoin.
According to a report from Wall Street Journal, the SEC issued Paxos a Wells Notice for selling and listing unregistered security BUSD. CoinMarketCap data shows BUSD is the third largest stablecoin with a market valuation of approximately US$16 billion.
Newsflash: SEC issues Wells Notice to Paxos informing Paxos of possible enforcement action. In my 18 years at SEC enforcement division, I can’t recall a time when I sent a Wells Notice and an enforcement action did not follow. SEC’s crypto-sweep continues! https://t.co/kItzSEcCUF
— John Reed Stark (@JohnReedStark) February 13, 2023
Paxos Gets Wells Notice From SEC
A Wells Notice is a communication issued by authorities to advise people or businesses of the conclusion of investigations in which violations were detected. It often takes the form of a letter informing the recipient of the nature of the infractions found and the compliance actions that will be taken against the receiver.
After receiving a Wells Notice, the accused has 30 days to file a legal response called a Wells Submission, which Investopedia explains should include evidence disputing the allegations.
On February 12, Eleanor Terrett of FOX Business tweeted that the SEC’s planned action versus Paxos was part of a “unilateral effort” by the commission and other regulators to “blitz crypto” and that more Wells notices were expected to arrive in the coming weeks.
Another step in the unilateral effort between the @SECGov, @NYDFS and @USOCC to blitz crypto. More Wells notices going out in the coming 2-3 weeks, I’m told.
Keep an eye on @JunoFinanceHQ. https://t.co/u4Q3pHN2lH
— Eleanor Terrett (@EleanorTerrett) February 13, 2023
This SEC action follows a recent restriction on cryptocurrency staking, a booming industry in which users earn money or interest by committing their crypto assets to a middleman or a crypto system. It also comes as U.S. regulators intensify efforts to oversee cryptocurrency enterprises in the wake of the widely reported bankruptcy of cryptocurrency exchange FTX.
The Popularity Of Stablecoins
Following the 2017 mania, stablecoins started to gain popularity. After bitcoin’s surge to nearly $20,000 and subsequent decline of more than 50%, investors sought a less volatile crypto-based store of value.
The popularity of crypto-based coinage prompted the US Federal Reserve to initiate an inquiry into its own digital currency, along with other national governments and central banks.
BUSD, like the top two stablecoins Tether USDT and USD Coin (USDC), is tied to the US dollar at a 1:1 ratio. Paxos began issuing BUSD stablecoin in 2019 after forming a relationship with BitUSD. However, it remains unclear if the SEC’s notice particularly pertains to Paxos’ issue of BUSD, the listing of BUSD, or both.
“Binance licenses its brand to Paxos for use with BUSD, which is entirely owned by Paxos and regulated/supervised by the New York Department of Financial Services,” Forkast quoted a Binance representative as saying in an email statement.
Binance clarified their market position as follows:
“BUSD is a 1-to-1 stablecoin that is among the most transparent stablecoins in existence.”
The SEC has not yet taken significant action against the leading stablecoin issuers on the market. Nonetheless, the regulator is expanding its inspection of the market constantly.
-Featured image from Army Times
