The SEC’s enforcement action against BUSD raises questions about whether the regulatory body is focused on the stablecoin market or the crypto exchange Binance.
Binance branded stablecoin, Binance USD , is a dollar-backed stablecoin issued by blockchain infrastructure platform Paxos Trust Company, and is the third largest stablecoin after Tether’s and Circle’s USD Coin Paxos has claimed in the past that BUSD is fully backed by reserves held in either fiat cash or United States Treasury bills. BUSD was reportedly authorized and regulated by the
New York State Department of Financial Services (NYDFS).
Paxos partnered with crypto exchange Binance in 2019 and launched the stablecoin, which received approval from the NYDFS. Binance CEO Changpeng Zhao has stated that the exchange licensed the Binance brand to Paxos, and BUSD is “wholly owned and managed by Paxos.”
However, on Feb. 12, the U.S. Securities and Exchange Commission (SEC) issued a Wells notice to Paxos — a letter the regulator uses to inform companies of planned enforcement action. The notice alleged that BUSD is an unregistered security. After receiving a Wells notice, the accused is allowed 30 days to respond via a legal brief known as a Wells submission — a chance to argue why charges should not be brought against prospective defendants.
One day later, the NYDFS ordered Paxos to stop minting new BUSD, citing specific unresolved issues around Paxos’ oversight of its relationship with Binance regarding BUSD. Paxos then decided to cut ties with Binance due to regulatory scrutiny, saying they are working with the SEC to resolve the issue constructively.
Binance, on the other hand, hopes the SEC won’t file an enforcement action based on the BUSD saga, telling Cointelegraph:
“The U.S. SEC, hopefully, will not file an enforcement action on this topic. Doing so is not justified by the facts or law. Furthermore, it would undermine the growth and innovation of the U.S. financial technology sector.”
Paxos refused to comment on the issue, citing ongoing talks with the SEC. The company directed Cointelegraph to an internal email with Paxos co-founder Charles Cascarilla reiterating their earlier stance that BUSD is not a security.
Source : [Is the SEC’s action against BUSD more about Binance than stablecoins?](cointelegraph.com/news/is-the-sec-s-action-against-busd-more-about-binance-than-stablecoins) by Cointelegraph By Prashant Jha - SEC Binance Crypto•Cointelegraph by Cointelegraph By Prashant Jha / February 27, 2023