SEC suddenly ends BUSD stablecoin investigation
Paxos, the company behind stablecoin issuance, announced on Thursday that the inquiry by the U.S. Securities and Exchange Commission (SEC) has wrapped up without any intention of taking enforcement actions.
In response to instructions from the New York Department of Financial Services at the start of the previous year, Paxos ceased the creation of BUSD. This action marked the termination of Paxos’s formal partnership with Binance, with Paxos indicating its readiness to contend with any legal challenges that might have been initiated by the SEC at that time. The SEC has remained silent regarding the alleged conclusion of this investigation.
Since its inception in 2019 under a licensing deal with the world’s top crypto exchange, Paxos had managed the BUSD stablecoin, which is anchored to the value of the U.S. dollar. Before facing regulatory setbacks, the stablecoin had amassed a market capitalization of $16 billion.
Paxos stated in a press announcement that Paxos Trust Company consistently argued that its dollar-backed stablecoins do not qualify as securities according to federal laws. This positive outcome is expected to catalyze further adoption of stablecoins by major worldwide corporations.
Previously, the SEC had suggested that Paxos’ BUSD could be considered a security in legal action taken against Binance, placing pressure on the exchange amid numerous other regulatory pursuits. Nonetheless, a federal judge dismissed these claims regarding the sale of BUSD last month.
The regulatory body expressed concerns over how the stablecoin was promoted, particularly Binance’s suggestions regarding BUSD’s potential for earning profits, arguing that it constituted an investment contract and thus, a security under the Howey Test, as per legal documents.
“The SEC did not plausibly allege that Binance offered and sold BUSD as an investment contract,” stated U.S. District Judge Amy Berman Jackson in a verdict that allowed the SEC’s lawsuit to proceed on other allegations, including violations of anti-fraud regulations.
