Paxos Faces Possible Lawsuit from SEC Over BinanceUSD – WSJ Report

The US Securities and Exchange Commission (SEC) enforcement division has sent a Wells notice to crypto firm Paxos, according to a report by The Wall Street Journal.

The notice informs Paxos that the SEC plans to bring enforcement action against the firm for alleged violations of securities and investor protection laws. The SEC is reportedly considering the Paxos-issued Binance USD (BUSD) stablecoin an unregistered security.

BUSD was launched in partnership with Binance in September 2019 and has since become the third-largest stablecoin and the seventh-largest cryptocurrency with a market capitalization of $16.15 billion, according to CryptoSlate data.

It is important to note that a Wells notice does not necessarily mean that the SEC will take enforcement action. The five commissioners of the SEC must vote to authorize any enforcement litigation or settlement by the agency.

Paxos has the opportunity to respond to the notice in writing and present its case as to why it should not be sued.

SEC Chairman Gary Gensler has previously stated that stablecoins, which are similar to bank deposits or money-market mutual funds, would be an area of focus for the SEC.

This is in line with the SEC’s decision to nearly double its Crypto Assets and Cyber Unit in May 2022.