TL;DR
- The SEC concluded its investigation into Paxos Trust Company and chose not to recommend legal actions against it.
- The company asserted that its stablecoins are backed 1:1 by US dollars and are not securities under federal laws.
- The SEC’s resolution could be seen as a catalyst for global adoption of safe and transparent stablecoins.
The U.S. Securities and Exchange Commission (SEC) has concluded its investigation into Paxos Trust Company, the issuer of the Binance USD (BUSD) stablecoin, and has decided not to recommend enforcement actions against the company. The decision, announced on July 9, 2024, marks the closure of a case closely followed by the industry since the company received a Wells notice from the SEC in February 2023.
Paxos has firmly maintained that its stablecoins backed by U.S. dollars are not securities under federal securities laws. In response to the SEC’s decision, the company issued a statement expressing that the Wells notice had been unwarranted. The company reaffirmed its commitment to the security of customer assets, clarifying that its stablecoins are always backed 1:1 with reserves denominated in U.S. dollars, fully segregated and held in remote bankruptcy-proof accounts.
“Paxos prevails in SEC investigation of BUSD stablecoin” 👏
On Tuesday, we received a formal termination notice from the SEC stating that it will not recommend enforcement action against Paxos Trust Company in the investigation of Binance USD (BUSD).
View the letter and our… pic.twitter.com/8kjysfsPg3
— Paxos (@Paxos) July 11, 2024
The outcome of the investigation is viewed by Paxos as a pivotal moment that could trigger a new wave of adoption of stablecoins by large enterprises worldwide. According to the company, well-designed stablecoins with strong consumer protections, such as those issued by Paxos, have the potential to transform the financial system in areas like payments, settlement, and remittances. Their goal is to make the financial system more stable, accessible, and transparent.
Paxos Marks Another Defeat for the SEC
Walter Hessert, head of strategy at Paxos, noted that the formal termination of the investigation is a great relief for the company and could foster greater certainty in the stablecoin market, especially among large enterprises entering or considering the crypto ecosystem. The decision could also influence future regulations on cryptocurrencies in the United States, providing clarity on how regulatory authorities may treat similar digital assets.
Recent judicial context has also played a role in this outcome. Last month, a court ruling dismissed the SEC’s claims that both BNB, Binance’s native token, and BUSD were securities on secondary markets. This ruling appears to have influenced the SEC’s decision not to proceed with enforcement actions against Paxos.
The SEC’s resolution of the investigation into Paxos and BUSD represents a pivotal point in cryptocurrency regulatory framework, offering a level of certainty and confidence in the adoption of well-designed and regulated stablecoins.
