On the evening of July 11, the U.S. Securities and Exchange Commission (SEC) unexpectedly dropped its investigation into Paxos, the issuer of the BUSD stablecoin, once closely associated with Binance.
U.S. authorities have decided to close the case against Paxos, which began in February 2023, without recommending any enforcement action. This news was confirmed by Jorge Tenreiro, Deputy Director of the SEC’s Crypto Assets and Cyber Unit.
“Paxos prevails in SEC investigation of BUSD stablecoin” ????
On Tuesday, we received a formal termination notice from the SEC stating that it will not recommend enforcement action against Paxos Trust Company in the investigation of Binance USD (BUSD).
View the letter and our… pic.twitter.com/8kjysfsPg3
— Paxos (@Paxos) July 11, 2024
This move is a significant victory for the crypto industry, as the status of stablecoins as securities remains uncertain.
The SEC’s decision was likely influenced by a recent court ruling in favor of Binance, stating that secondary market sales of BNB are not considered securities. This ruling is similar to the mid-2023 decision in the SEC’s case against Ripple.
Walter Hessert, a representative of Paxos, stated:
“The end of the investigation is a relief for us. This decision could break down barriers and encourage major companies to explore the stablecoin sector.”
The legal issues began a year and a half ago, sparked by New York authorities on February 10, 2023. Two days later, Paxos received a Wells Notice from the SEC, accusing BUSD of being an unregistered security.
Paxos was also ordered to stop issuing BUSD, leading to its decision to cut ties with Binance, as BUSD was closely linked to the world’s largest crypto exchange.
As a result, Paxos had to burn 700 million BUSD. Binance CEO Changpeng Zhao and the crypto community gradually distanced themselves from the stablecoin, effectively ending its use. Binance removed BUSD trading pairs late last year and promoted the new star FDUSD.
However, the SEC still has ongoing cases against exchanges Coinbase, Binance, and blockchain infrastructure developer ConsenSys and has warned the DEX Uniswap. Additionally, it imposed a $4.47 billion fine on Do Kwon and Terraform Labs.
