SEC suddenly drops investigation into Paxos

Last year, the U.S. Securities and Exchange Commission (SEC) issued a notice of investigation against crypto infrastructure provider Paxos and sued cryptocurrency exchange Binance, treating the stablecoin jointly issued by both parties, Binance USD ($BUSD), as as securities and ordered to stop issuing $BUSD.

Subsequently, the market value of $BUSD evaporated. After Binance destroyed and removed relevant trading pairs, $BUSD has faded out of the stage of history in the past year. However, the whole incident has taken a turn for the worse in recent days.​

This week (July 9, 2024), issuer Paxos officially announced that the U.S. Securities and Exchange Commission (SEC) has quietly terminated its investigation into Paxos and decided not to recommend enforcement against Paxos Trust Company action.​

Determined that BUSD "is not a security"

According to a report in Fortune Magazine, the SEC made it clear in a letter that $BUSD does not constitute a security. This decision freed Paxos from the shadow of more than a year of investigation and also caused the market to re-examine the legal positioning of stablecoins. .​

Walter Hessert, head of strategy at Paxos, said in an interview: "The formal termination of this investigation is a huge relief to us, which is what we have expected all along, and it should really create more certainty for the market. We see More and more large companies are joining.”

Image source: Paxos

In addition, Paxos also emphasized in a statement that $BUSD was not a security from the beginning, and denounced the Wells Notice it received as completely unfounded: "We believe that the results of this time will open the door for the world's leading companies to adopt stable currencies. A new wave of well-designed stablecoins with strong consumer protections, such as those issued by Paxos, will transform the financial system in payment, settlement and remittance use cases. This transformative technology will make the financial system more stable, convenient and efficient. transparent."

Paxos also emphasized the security of its stablecoins, guaranteeing that all stablecoins issued by the company are backed 1:1 by U.S. dollar reserves, fully isolated and held in remote accounts.​

Netizens said: Of course there is no need to check if it is poured

Netizens also reacted enthusiastically to this matter. Some people believed that the SEC's attitude was very different from its initial attitude because of the impact of the upcoming US election at the end of the year. Some netizens joked: "Of course there is no need to investigate if it falls," mocking the SEC's decision. It came too late, and the fruitless investigation ended only after $BUSD was basically out of the market.​

Although the SEC’s decision has temporarily lifted Paxos from legal risks, it does not mean that the stablecoin market will be smooth sailing from now on. Stablecoin issuers still need to face regulatory pressure and market challenges from all parties.