Paxos Could Face Legal Action from the SEC Regarding BUSD

The US Securities and Exchange Commission (SEC) may likely file a lawsuit against Paxos Trust Company over Binance USD (BUSD) stablecoin. According to sources familiar with the situation, the SEC is claiming Paxos violated investor protection laws.

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As explained in the notice letter issued to Paxos, the regulator alleges that the BUSD token being issued by Paxos is an unregistered security. However, it is still unclear whether the SEC notice is explicitly connected to the coin’s issuance by Paxos, the listing on the exchange, or both.

It is worth noting that the notice does not necessarily mean that the SEC will pursue enforcement action. SEC’s five commissioners are required to approve any enforcement agreement or legal action.

Binance and Paxos both launched the BUSD in 2019. The BUSD is a stablecoin that is linked to the price of the US dollar. It is a digital asset that has been created to maintain a steady value by having its value linked to a reserve of the US dollar.

The BUSD can be used for a variety of purposes including facilitating cross-border transactions and serving as a payment method for goods and services. As relating to utility, the UN agency for refugees donated $2.5 million BUSD stablecoin to assist refugees fleeing Ukraine to neighboring countries.

SEC Intensifies Crypto Enforcement Efforts

The US SEC is in charge of overseeing the securities sector and defending investors. The SEC has focused more on cryptocurrencies in recent years due to worries about fraud and investor protection in this quickly expanding market. 

The SEC has taken a number of enforcement proceedings against people and businesses involved in cryptocurrency-related activities, alleging violations of federal securities laws. For instance, the SEC filed a lawsuit against LBRY, a Blockchain-based file-sharing and payment network over the sale of native LBC tokens as securities.

In addition to its enforcement efforts, the SEC has also issued guidance to help market participants understand their obligations under federal securities laws. As regards this, the SEC recently rejected ARK Investment Management’s and 21Shares’ applications for their spot Bitcoin (BTC) Exchange Traded Fund (ETF).

Overall, the SEC’s increased focus on cryptocurrency is part of its broader efforts to promote market integrity and protect investors in a rapidly evolving financial landscape.

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