Bitcoin

According to a report published on Feb. 12, 2023, the New York-based financial institution and technology company, Paxos, has received a Wells Notice from the U.S. Securities and Exchange Commission (SEC) regarding alleged violations of investor protection laws. Paxos revealed the following day, that it would no longer mint BUSD and it was ending its relationship with the Binance-branded stablecoin in Feb. 2024.

Report Claims SEC Plans to Sue Paxos for Alleged Investor Protection Violations, Firm Directed to Stop Minting BUSD

Sources cited by the Wall Street Journal (WSJ) say the U.S. Securities and Exchange Commission (SEC) plans to sue Paxos for violating investor protection laws. People familiar with the matter say Paxos received a Wells Notice, a letter sent by a securities regulator regarding a prospective lawsuit. The notice alleges that the stablecoin Binance USD, which Paxos issues and manages, is an unregistered security.

Three WSJ reporters published the report and contacted both Paxos and Binance for comment. Binance informed the WSJ that the stablecoin’s brand is licensed by the major exchange, but Paxos issues and manages the dollar-pegged asset.

A Paxos spokesperson told the reporters that the company is “not commenting on any individual matter.” The latest news follows an alleged investigation into Paxos by the New York State Department of Financial Services (NYDFS), which was originally reported by Nikhilesh De of Coindesk on Feb. 9.

Paxos was founded in 2012 and was originally named Itbit. In 2015, the New York State Department of Financial Services (NYDFS) granted permission for Paxos to become a limited-purpose trust charter and the company changed its name from Itbit to Paxos Trust Company.

The firm manages two stablecoins: pax dollar (USDP) and binance usd (BUSD), as well as pax gold (PAXG). USDP has a market capitalization of approximately $898.16 million, while BUSD’s market valuation is estimated at around $16.1 billion.

PAXG has a market capitalization of approximately $492 million. Over the last 12 months, the supply of PAXG has declined by approximately 3.1%, while USDP has declined by 15.71%. Year-to-date statistics show BUSD’s circulating supply has dropped 9%, but during the mid-half of 2022, BUSD’s supply increased.

Paxos to Cease Minting Binance Stablecoin

Last month, 5 billion BUSD were redeemed in 24 days. Binance told the WSJ that it will “continue to monitor the situation” when questioned about the alleged SEC charges against Paxos. To date, the country’s top securities regulator has not taken any enforcement action against stablecoin issuers.

Following the report in the WSJ on Sunday, the publication further reported that the New York Department of Financial Services (NYDFS) has ordered the company to stop issuing BUSD. Paxos confirmed in a press release that it will stop minting the stablecoin and end its relationship with it by 2024. The company stated that it was directed by the New York regulator and has been working closely with the authorities. Paxos will continue to manage BUSD until they are fully redeemed, which will be by at least February 2024.”

Tags in this story
$16.1 billion, $492 million, $898.16 million, 5 billion, 9, alleged violations, Binance, Binance USD, BUSD, circulating supply, enforcement action, financial institution, founded, investor protection laws, ItBit, limited-purpose trust charter, Market Capitalization, monitor, NYDFS, PAXG, Paxos, Paxos Trust Company, probe, redemptions, SEC, securities regulator, situation, Stablecoin, stablecoin issuers, Supply, technology company, unregistered security, USDP, wells notice, year-to-date statistics

What do you think about the alleged SEC charges against Paxos and the future of stablecoins in the U.S.? Share your thoughts in the comments below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.




Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read disclaimer

Articles You May Like

Top Wall Street analysts pick these dividend stocks for enhanced returns
Sidelined cash may want to stay sidelined
Top Goldman investment bankers threaten to quit over committee snub
UK nuclear missile test fails for second time in eight years
Starmer will only reveal his true face in power