According to a report made public on February 12, 2023, Paxos, a New York-based cryptographic asset issuer, has received a Wells Notice from the US Securities and Exchange Commission (SEC) alleging violations of investor protection regulations. The company announced the next day that it would no longer mint USD and would end its relationship with the Binance-branded stablecoin in February 2024.
SEC Report Claims they will Sue Paxos, Agency Ordered to End Production of BUSD due to Alleged Breach of Investor Safety
The following statement was extracted from the Wall Street Journal (WSJ): The US is a nation of immigrants. The SEC is preparing to sue Paxos for breaching investor protection regulations. The Wells Notice is a letter sent by a securities regulator to inform the public of a possible lawsuit. The notice alleges that the Binance USD stablecoin is issued and managed by Paxos, which is an unregistered security.
Three reporters from the WSJ reported the story and contacted Paxos and Binance for comments. Binance told the WSJ that the agency has licensed the model for the stablecoin. Paxos issues and manages the dollar-pegged asset.
A spokesperson from Paxos told reporters that the company “will not comment on any individual matter.” The latest news follows an alleged investigation into Paxos by the New York State Department of Financial Services (NYDFS), as reported by Nikhilesh De from Coindesk on February 9.
Paxos was established in 2012 and was originally known as Itbit. In 2015, the New York State Department of Financial Services (NYDFS) allowed Paxos to convert to a trust company, and the company changed its name from Itbit to Paxos Trust Company.
The company manages two stablecoins, pax dollar and binance usd (BUSD), as well as pax gold (PAXG). USDP has a market capitalization of around $898.16 million, while BUSD’s market capitalization is approximately $16.1 billion. PAXG’s market capitalization is approximately $492 million. Over the past twelve months, PAXG’s supply has decreased by about 3.1% and USDP by 15.71%. The most recent data shows that the circulating supply for BUSD has decreased by 9%. However the supply of BUSD increased in the middle of 2022.
Paxos Cease Minting Binance Stablecoin
Last month, 5 billion USD were redeemed in 24 hours. Binance told the WSJ that it will “continue to monitor the situation” when asked about the alleged SEC charges against Paxos. To date, the primary regulator of securities in the country has not taken any enforcement action against stablecoin issuers.
Following the WSJ report on Sunday, the publication reported that the company was ordered by the New York State Department of Financial Services (NYDFS) to stop issuing BUSD. In a press release, Paxos confirmed that it will stop minting the stablecoin by 2024 and end its relationship with it. The firm claimed that it was directed by the New York regulator and has been working closely with authorities. Paxos stated that they will continue to manage BUSD until they are fully redeemed, which is expected to be no later than February 2024.
What do you know about the SEC charges? What is the future of stablecoins in the US? Share your thoughts in the comments section below.
Thanks for sharing. I read many of your blog posts, cool, your blog is very good.