On February 13, 2023, Paxos, the issuer of BUSD stablecoin, received a Wells Notice from the US Securities and Exchange Commission (SEC) regarding the offering of BUSD, which stated that the SEC staff is considering recommending an action alleging that BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws. However, it is worth noting that Paxos’ own stablecoin, USDP Pax dollar, was not affected by the notice [2]. In response to the SEC’s notice, Paxos issued a statement on February 13, 2023, stating that it “believes that its BUSD offering was conducted in compliance with applicable laws and regulations, and it intends to fully cooperate with the SEC’s inquiry” [2].
It is worth noting that Binance, the largest cryptocurrency exchange in the world, lists BUSD on its platform. On February 13, 2023, the same day that Paxos received the Wells Notice, Binance CEO Changpeng Zhao reassured users that BUSD is wholly owned and managed by Paxos and that all funds are safe. He also stated that BUSD is audited monthly by Withum, a US accounting firm [3].
It seems that regulators are increasingly cracking down on cryptocurrency companies and their products. In this case, the SEC’s notice to Paxos about BUSD is just one example. The US government has been cracking down on cryptocurrency in general, particularly on exchanges that are not compliant with US laws and regulations. This has led to Binance’s withdrawal from the US market in recent years, and now with the potential threat to BUSD, it seems that regulators are forcing Binance out of the US completely [3].
As a result of the SEC’s notice, Coinbase has also delisted BUSD from its platform, citing the regulatory uncertainty around the stablecoin. The move by Coinbase is significant as it is one of the largest cryptocurrency exchanges in the US, and the delisting of BUSD may impact the adoption and liquidity of the stablecoin [4].
It is not ideal for regulators to be a “king maker” in the cryptocurrency space, as it stifles innovation and development. While regulation is necessary to protect investors and ensure compliance with laws and regulations, excessive regulation can also have a negative impact on the industry. It is important to strike a balance between regulation and innovation to ensure that the cryptocurrency industry can continue to grow and develop in a sustainable manner.
References
[1] “On Saturday, February 18, Paxos CEO Co-Founder Charles Cascarilla shared the following message with the Paxos team. Hi Team — This has been a busy week for everyone at Paxos. I first want to express my deep gratitude to all of you for your hard work, ownership and your shared commitment to the Paxos mission.” URL: https://paxos.com/2023/02/21/update-from-paxos-ceo-co-founder-charles-cascarilla/
[2] “The Wells notice states that the staff of the SEC is considering recommending an action alleging that BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws. Paxos has issued the following statement:” URL: https://paxos.com/2023/02/13/paxos-issues-statement/
[3] “The watchdog issued Paxos a Wells Notice, confirming its intent to bring a lawsuit against the crypto company. promo Updated 10:15UTC, Feb.13: Binance CEO Changpeng Zhao took to Twitter to reassure users that BUSD is wholly owned and managed by Paxos and that all funds are safe. #BUSD. A thread. 1/8 In summary, BUSD is issued and redeemed by Paxos.” URL: https://beincrypto.com/sec-crypto-paxos-suit-binance-usd-stablecoin-listing/
[4] “It was in the year 2019 that Binance, along with Paxos, had seemingly declared their merging and, correspondingly, the stablecoins launch. It also happens that Paxos handled digital asset exchange itBit, which also lists BUSD. It further happens to be listed by other agencies too.” URL: https://www.cryptonewsz.com/paxos-trust-co-gets-wells-notice-from-sec-over-busd-token/
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