The United States Securities and Exchange Commission has reportedly told Paxos Trust Co. that it plans to sue the stablecoin issuer for violation of investor protection laws in relation to its Binance USD token.
The SEC has issued a Wells Notice to Paxos which is a letter the regulator uses to tell companies of planned enforcement action.
The notice alleges that Binance USD is an unregistered security, according to the people.
According to Investopedia, after a Wells Notice is received, the accused is allowed 30 days to respond to it via a legal brief known as a Wells Submission, a chance to argue why the charges should not be brought against t prospective defendants.
A spokesperson for Binance said that BUSD is a Paxos issued and owned product, with Binance licensing its brand to the firm for use with BUSD. The spokesperson added that Paxos is regulated by the New York Department of Financial Services and that BUSD is a “1 to 1 backed stablecoin.
Paxos is the owner and issuer of BUSD, a U.S. Dollar-collateralized stablecoin that has been around since the firm struck a partnership with Binance in September 2019. It is the third-largest stablecoin, with a market cap currently exceeding $16 billion.
Paxos is also the creator of the Paxos Dollar stablecoin, which was launched in 2018, and is also behind digital asset exchange itBit, which it launched in 2012 alongside the founding of Paxos.
The SEC faced criticism from its own people for its action against Kraken. On Feb. 10 SEC Commissioner Hester Peirce said the SEC’s conduct is not an efficient or fair way of regulating, slamming her own agency for shutting down a “program that has served people well.”
Reports also emerged last week that Paxos was being investigated by the NYDFS. However, the exact motive behind the probe is currently unclear.
