Paxos Trust Company, the company behind Binance‘s stablecoin, is in talks with the U.S. Securities and Exchange Commission after the regulator informed the company that it should have registered the token as a security, according to an email from Paxos’ CEO.
Paxos in talks with the SEC
According to a Reuters report dated February 21, Paxos CEO Charles Cascarilla stated that the company was engaging in constructive discussions with the SEC and will continue to communicate in private. The report came after the SEC sued the stablecoin issuer, which asserted that BUSD was an unregistered security.
We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private […] The market has evolved, and the Binance relationship no longer aligns with our current strategic priorities.
Paxos CEO Charles Cascarilla
Cascarilla reportedly stated that Paxos would consider using litigation to support its argument that BUSD was not a security. Paxos is licensed in the U.S. state of New York, and on February 13, the New York Department of Financial Services ordered the company to cease the issuing of BUSD. In addition, the company stated on February 21 that it would cease minting the stablecoin.
Previously, the SEC announced on Feb. 9 that it had reached an agreement with Kraken in which the company agreed to stop providing staking services or programs to US consumers and pay $30 million.
The NYDFS inquiry into Paxos may have been prompted by a tip from Circle, which apparently filed a complaint with the state regulator over Binance’s reserves. Following the BUSD release, data from Binance indicated an increase in withdrawals – nearly $2.7 billion in outflows between Feb. 12 and Feb. 13.
Cascarilla stated that Paxos was still working with the SEC to publish its application for a clearing agency license, as well as with the US Office of the Comptroller of the Currency (OCC) to secure final approval for its national trust bank charter.
We are working with the SEC towards the publication of our Clearing Agency application […] We are working with the OCC to move our conditional approval into an operationalized and launched National Trust. We are also working to expand our Singapore products in consultation with the MAS. We continue to pursue each of these plus any other opportunities for productive collaboration with regulators.
Charles Cascarilla
The SEC accelerates crypto crackdown
According to Cascarilla, Paxos has processed over $2.8 billion in BUSD redemptions with no noticeable market disturbances since the issue freeze was announced. In the interim, Paxos is collaborating with regulators to improve its reputation.
Gary Gensler, head of the U.S. Securities and Exchange Commission (SEC), believes the cryptocurrency industry is playing a game with his agency. He has stated that firms are aware of what they must do to operate legally in the United States but have chosen not to do so — some of them in flagrant contempt of the regulator.
How long can the crypto industry continue to pretend it doesn’t know what the SEC wants, as evidenced by the agency’s repeated actions against the Terra/Luna ecosystem and its founder?
Late in 2022, industry insiders began to wonder what the SEC was waiting for because crypto enforcement cases appeared to have paused. In addition, many wondered if the SEC was awaiting the outcome of its important court case with Ripple before engaging in more legal battles with crypto companies. In 2023, however, the SEC launched a series of activities and policy decisions with enormous potential ramifications for digital assets.
Gensler implies he is disappointed by the crypto platforms’ reluctance to enter his premises. Recent weeks have witnessed a surge of SEC lawsuits that might further tip the scales, despite Gensler’s continued warnings about the shrinking compliance runway.
