Paxos served with Wells Notice by SEC over BUSD

• SEC has reportedly served stablecoin issuer Paxos Trust Co. a Wells Notice, alleging that it has violated protection laws in relation to the Binance USD (BUSD).

• According to the notice, BUSD is unregistered security.

The US Securities and Exchange Commission (SEC) is set to launch another lawsuit against a crypto firm for issuing unregistered securities. This follows the two years-long legal battle against Ripple labs over a similar allegation. On February 12, the Wall Street Journal disclosed in a report that the SEC has served stablecoin issuer Paxos Trust Co. a Wells Notice, alleging that it has violated protection laws in relation to the Binance USD (BUSD). According to the notice, BUSD is unregistered security. Wells Notice is served to inform companies of planned enforcement actions. 

According to sources, the accused have 30 days to respond to the Wells Notice through a legal brief called Wells Submission. The response includes why the charges should not be leveled against the defendant. It is worth noting that Paxos is the owner and issuer of BUSD which has been in existence since the company sealed a partnership agreement with Binance in 2019. 

Paxos was reportedly being investigated by the NYDFS

Last week, it was reported that the company was being investigated by the NYDFS, however, the main idea behind this was not known. 

BUSD is a 1 to 1 backed stablecoin and is currently the third-largest stablecoin with a market capitalization of more than $16 billion. The Paxos Dollar (USDP) was also created by Paxos and has been in the market since 2018. In addition, it has been behind the digital asset exchange itBit since 2012.

It is worth noting that Paxos is regulated by the New York Department of Financial Services (NYDFS). 

Speaking with an SEC spokesperson, he mentioned that the Agency does not comment on the “existence and nonexistence of a possible investigation.”

Stablecoins are a critical safety net for investors seeking refuge from volatile markets and limiting their access would directly harm millions of people across the globe. We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.

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SEC to serve more of this Notice in the coming weeks – FOX Business journalist

The ruling of the SECs and the Ripple Labs lawsuit is yet to be announced. The blockchain company CEO, Brad Garlinghouse has repeatedly asked the crypto community to support them as a loss for them could spell doom for the entire crypto industry. SEC could have the license to go after the rest depending on the outcome of this case. On February 12, FOX Business journalist Eleanor Terrett warned in a tweet that SEC and other regulators could “blitz crypto”. According to him, more Wells Notices are expected to be served in the coming weeks. 

Recently, SEC went after crypto exchange Kraken for failing to register its crypto staking program said to be a security. On February 9, SEC announced a $30 million settlement with Kraken. 

SEC Chair Gary Gensler has stated that many crypto firms have questionable business models. 

If this field has any chance of survival and success, it’s time-tested rules and laws to protect the investing public. Don’t have your hand in the customer’s pocket, using their funds for your own platform.

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SEC Commissioner Hester Peirce has, however, criticized the Agency over its “unfair” way of regulating using law enforcement. 

In the midst of these, some investors have liquidated their assets as Bitcoin looks for support. The digital asset is down by 4 percent in the last seven days, and currently trading at $21,863.

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