- The SEC has dropped its investigation into Paxos over the BUSD stablecoin after issuing a Wells notice over a year ago
- A notice seen by Fortune has revealed that the SEC will not take action against Paxos Trust Co.
- The SEC has reportedly changed its mind on suing Paxos for “violating investor protection laws” related to BUSD
The Securities and Exchange Commission (SEC) has dropped its investigation into stablecoin issuer Paxos, more than a year after issuing it with a Wells notice. A notice seen by Fortune reveals that the agency will not take any action against Paxos Trust Co. over the dollar-backed BUSD stablecoin, which Paxos issued in partnership with Binance. It was reported at the time that Paxos was going to be sued by the SEC for “violating investor protection laws” relating to the listing of BUSD, which has never been externally audited, but it seems that the SEC has changed its mind over the matter.
Wells Notice Comes to Nothing
The SEC issued Paxos with a Wells notice last February, essentially asking Paxos why it shouldn’t be sued over issuing the BUSD stablecoin (which it alleged was an unregistered security). The New York Department of Financial Services also got involved, telling Paxos, which holds a New York Bitlicense, to “cease minting Paxos-issued BUSD as a result of several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD.”
The development was in relation to concerns that BUSD was not 100% backed by fiat currencies, as Binance recently admitted it historically hasn’t been. Paxos delisted BUSD and ceased all minting activity as a result, with Binance announcing that it was shuttering the stablecoin late last year.
Paxos Can Restart its Engines
On July 9, Jorge Tenreiro, acting chief of the SEC’s crypto assets and cyber unit, informed Paxos that he did not plan to recommend enforcement action against the company. The SEC’s retreat comes shortly after a partial defeat in its lawsuit against Binance, where the charges against it were reduced.
Walter Hessert, Paxos’ head of strategy, expressed relief in an interview with Fortune, stating, “The termination of this investigation is an enormous relief for us. It’s what we expected all along, and it should create more certainty in the market among large enterprises.”
The SEC’s investigation cast a shadow over Paxos, hindering its ability to forge new partnerships, including one with PayPal. Hessert noted that ending the probe “will accelerate some really exciting enterprise conversations.”
