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Paxos ‘Categorically Disagrees’ With SEC That BUSD Is a Security, Says It Will Litigate if Needed
The stablecoin issuer confirmed it has received a Wells Notice from the SEC, indicating a possible enforcement action is forthcoming.
By Nelson Wang
Updated Feb 13, 2023, 11:37 p.m. Published Feb 13, 2023, 9:14 p.m.
Stablecoin issuer Paxos acknowledged that it has received a Wells Notice from the U.S. Securities and Exchange Commission, indicating a possible enforcement action based on the charge that its Binance USD constitutes an unregistered security, according to a Monday press release. BUSD is a stablecoin branded by Binance that’s pegged to the U.S. dollar.
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But the firm said it “categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.” It also claimed that Paxos is “always backed 1:1 withU.S. dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,” and said the firm is “prepared to vigorously litigate if necessary.”
Earlier on Monday, Paxos said it would stop minting new BUSD tokens at the direction of the New York Department of Financial Services (NYDFS). CoinDesk had earlier reported that Paxos was under investigation by the NYDFS.
Paxos also noted in its press release that the Wells Notice specifically had to with BUSD and not any other part of its business. “This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos,” Paxos wrote.
Paxos did not immediately respond to a request for additional comment from CoinDesk.
The Block earlier reported on Paxos’ comments.
Read more: Circle Sounded Alarm on Paxos, Told NYDFS Binance’s Stablecoin Wasn’t Fully Backed: Bloomberg
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