SEC sues Paxos alleging stablecoin BUSD is a security

This is considered the latest move from the SEC in the escalating battle between this agency and the cryptocurrency industry.

SEC sues Paxos alleging stablecoin BUSD is a security

The United States Securities and Exchange Commission (SEC) is about to file a lawsuit against Paxos Trust Company as an issuer of BUSD, alleging that the coin is an unregistered security, according to Wall Street Journal.

According to sources familiar with the matter, the SEC sent a Wells Notice letter (for businesses the SEC is about to sue) to Paxos stating that the enforcement action was because the BUSD issuer had “violation of investor protection law“. The letter also states “Binance USD is an unlicensed security“.

Binance USD, or BUSD, is a Binance-branded stablecoin pegged 1:1 to the USD, which the exchange partnered with Paxos released in 2019.

As of January 31, 2023, Paxos is managing $16.15 billion in collateral for BUSD, which includes cash (3.94%), US Treasury bonds (20.58 percent) and repurchase contract (75.48%).

In a statement, Binance said BUSD is issued and owned by Paxos and that it is solely tied to its brand. “We will continue to monitor the situation and issues of Paxos,” the statement read.

However, the Wells Notice is not the final step in indicating that the SEC will act. The agency’s five commissioners need to vote to proceed with any litigation. According to Investopedia, after receiving the Wells Notice, the defendant has 30 days to respond with a legal brief called the Wells Submission, which includes arguments to counter the previous allegations.

Less than 3 days ago, this famous stablecoin issuer just fall under the investigation of the New York government, but the reason is still unknown. It is easy to see that the SEC is increasing the exercise of its power over the crypto market. Last week, Kraken has agreed to permanently stop staking products in the US and pay a fine of 30 million USD to the SEC. Chairman Gensler at that time was still “deterring” the crypto industry after the sanction.

But before the above news, the third-ranked stablecoin by market capitalization was depeg (dropped from the anchor) slightly to the area of ​​$ 0.9995. This reaction also easy to understand as in the pastwhen FUD series on Binance is “peaking”.

4h chart of BUSD/USDT pair on Binance exchange at 08:40 AM on February 13, 2023

Meanwhile, BNB in ​​the past 24 hours has decreased but the reaction is not strong and it seems that the market is not too negative.

1h chart of BNB/USDT pair on Binance exchange at 08:40 AM on February 13, 2023

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