Stablecoin issuer Paxos said Monday that it received a Wells Notice from the U.S. Securities and Exchange Commission on Feb. 3, confirming a report by the Wall Street Journal on Sunday.
The notice said that the SEC is considering recommending an action alleging that Paxos failed to register BUSD, a stablecoin issued by Paxos and branded by the world’s largest crypto exchange Binance, as a security.
A Wells Notice from the SEC is a formal notice that informs a recipient of potential charges the regulator may bring against them.
“Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws,” Paxos said in the Monday statement.
“We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary,” the company said.
The SEC Wells notice is only relevant to BUSD, and not related to other products Paxos offers, such as another stablecoin called Pax Dollar, according to Paxos.
BUSD is a stablecoin “wholly owned and managed by Paxos,” a Binance spokesperson said.
Cryptocurrency infrastructure firm Paxos has confirmed the receipt of a notification from the United States Securities and Exchange Commission (SEC) about potential charges relating to its stablecoin, BUSD.
The crypto startup posted the notice to its official website on the 15th of April 2021, revealing that the SEC alleged some of the actions taken by Paxos with regards to BUSD may be in violation of US securities laws.
The company refrained from offering any specifics as to what these allegations entail due to existing confidentiality provisions, however they did state they intend to actively cooperate with regulatory authorities to come to an amicable resolution.
Paxos went on to assure its customers that BUSD is still operating as normal and that users’ funds remain safe in Paxos’ custody, and the firm has proactively retained legal counsel to handle the SEC inquiry. As such, further updates to this unfolding story are expected in due course.
The stablecoin industry is still in its nascent stages with only 3% of crypto users having adopted the popular asset class according to a recent report from Blockchain.com. This development with Paxos is important to long-term stability in the stablecoin market, and we will be watching for further updates in the coming weeks.