Paxos: SEC ends BUSD stablecoin investigation without enforcement action

Stablecoin issuer Paxos said on Thursday that an investigation conducted by the U.S. Securities and Exchange Commission (SEC) had been completed and that no enforcement action was in sight.

“On Tuesday, we received a formal notice of termination from the SEC stating that it will not recommend any enforcement action against Paxos Trust Company,” the company said. said on Twitter (aka X), adding that the agency’s investigation focused on BUSD, its Binance-branded stablecoin.

Paxos stopped minting BUSD at the direction of the New York Department of Financial Services early last year. As a sign of the end of the company’s official relationship with Binance, Paxos signaled that it ready to fight all charges brought by the SEC at the time. The SEC has not yet made any public statement on the alleged end of the investigation.

“The SEC does not comment on the existence or non-existence of a possible investigation,” the regulator said in a statement to Decrypt.

Due to a licensing agreement with the largest crypto exchange, Paxos owned and operated its stablecoin BUSD since 2019. Pegged to the dollar, the stablecoin’s market capitalization rose to $16 billion before regulators put a stop to it.

“Paxos Trust Company has always emphasized that its USD-backed stablecoins are not securities under the Federal Securities Act,” Paxos said in a Press release“We believe this development will trigger a new wave of stablecoin adoption by leading global companies.”

The SEC had alleged that Paxos’ BUSD stablecoin was a security in a lawsuit filed against Binance last year, pressuring the exchange with that claim among a number of other enforcement actions. However, the charges related to the BUSD sale were dismissed by a federal judge late last month.

The regulator criticized the way the stablecoin was marketed, arguing that Binance’s talk of BUSD’s “profit potential” made the stablecoin an investment contract and therefore a security under the Howey test, the court said. Submissions.

The SEC “did not plausibly allege that Binance offered and sold BUSD as an investment contract,” US District Judge Amy Berman Jackson recently wrote in a Decisionwhich allowed the SEC’s lawsuit to proceed on several other counts, including anti-fraud violations.

On Twitter, Juan Leon, a senior investment strategist at asset manager Bitwise, wrote, described Thursday’s revelation is “another success for stablecoins as they gain increasing traction around the world.”

“Congratulations,” wrote Jeremy Allaire, CEO of Circle, which issues the stablecoin USDC. “There is regulatory clarity around the world that payment stablecoins are payment money, not securities.”

Edited by Andrew Hayward