Paxos Disagrees With the SEC That BUSD is a Security

In response to the United States Securities and Exchange Commission (SEC) allegation, Paxos, a blockchain infrastructure platform said that it absolutely disagrees with the regulators as Binance USD (BUSD) stablecoin is not to be referred to as a security.

This is coming a day after the stablecoin issuer received a Wells Notice from the US SEC over its BUSD stablecoin. In the letter which notified the firm of a potential enforcement action, the regulators allege that the BUSD token issued by Paxos is an unregistered security. Also, the firm confirmed that the notice was restricted to only its BSUD and does not relate to any of its other products.

Aside from the Binance-backed token, the stablecoin issuer also has its own stablecoin dubbed Paxos Dollar (USDP) which is equally pegged to the US dollar. The crypto firm is also the founder of Pax Gold (PAXG), a gold-backed cryptocurrency. 

According to the stablecoin issuer, its Binance-backed token doesn’t qualify as a security under federal securities laws. Additionally, the stablecoin is completely pegged 1:1 to the US dollar reserve. Therefore, the firm strongly disagrees with the regulator and it’s ready to defend its position in a US Court if necessary.

Recall that a few days ago, the New York State Department of Financial Services (NYDFS) opened a probe into the infrastructure company. Not long after, the top-funded fintech company agreed to end the minting of the new BUSD tokens beginning from February 21 in obedience to the NYDFS directives. However, existing BSUD which maintained a 1:1 dollar pegging will remain redeemable until February 2024.

Crypto Firms set to Face SEC in Court

Interestingly Paxos isn’t the only crypto firm ready to face the US regulator in a law court over claims of offering unregistered securities.

Just like Paxos, Coinbase CEO Brian Armstrong has said the firm is willing to defend its staking products in court after the SEC alleged that it offered unregistered securities. He argues that his firm’s staking services do not meet the Howey Test which examines investment options under four elements namely investment of money, common enterprise, a reasonable expectation of rewards, and other people’s efforts.

On the other hand, Kraken entered an agreement with the regulator for $30 million and also exit the US market after the regulator alleged that the firm failed to register its staking-as-a-service product.