WSJ has learned of a pending SEC lawsuit against the issuer of Binance USD stablecoin
Securities and Exchange Commission alleges that the asset Paxos is issuing is an unregistered security
The U.S. Securities and Exchange Commission (SEC) informed the issuer of stablecoin Paxos Trust that it plans to sue it for violating investor protection laws, reported The Wall Street Journal, citing its sources.
According to the Journal, the SEC notice alleges that Binance USD (BUSD), a digital asset that Paxos issues, is unregistered security. It is not yet known whether the SEC notice specifically relates to the issuance of BUSD, its listing or both, the report said.
A notice from the SEC does not mean the agency will necessarily initiate litigation. Recipients of such notice are allowed to respond to the regulator and explain why a lawsuit should not be filed.
BUSD is a Binance-branded cryptocurrency exchange pegged to the U.S. dollar. Binance and Paxos announced a partnership and launched the coin in 2019. According to CoinGecko, the asset has a market capitalization of $1.6 billion, ranking it 7th among all cryptocurrencies and third among stackable coins after USDT and USDC.
Last week it also became known that Paxos was the subject of an audit by the New York State Department of Financial Services (NYDFS). The regulator said it could not comment on an ongoing investigation into the matter, but noted that it is continually examining supervised entities to identify consumer and institutional risks associated with crypto market volatility.
In the wake of regulatory investigations into Paxos, payments giant PayPal announced it was suspending work on its Stablecoin, Bloomberg reported. The company had planned to release the dollar-linked coin in the coming weeks, but will postpone it in light of the "changing regulatory landscape for such digital assets."
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