Paxos ‘categorically disagrees’ with the SEC that BUSD is a security

Published at: Feb. 14, 2023

Paxos Trust Company has released a statement noting that it "categorically disagrees" with the United States securities regulator which has painted Binance USD (BUSD) as a security. 

In the Feb. 13 statement, the BUSD issuer confirmed recent reports that it had received a Wells notice from the United States Securities and Exchange Commission (SEC) over BUSD and its alleged failure to register the offering under federal securities laws.

END/ Paxos remains dedicated to the development of stablecoins, tokenization & #blockchain technology. We’ll continue serving the world’s most respected and established companies to create a more open financial system.

— Paxos (@PaxosGlobal) February 13, 2023

"Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws," Paxos said.

The firm noted it had received the notice on Feb. 3, adding that "there are unequivocally no other allegations against Paxos."

"We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary," it added.

On Feb. 13, New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD.

Following the order, Paxos announced in a Feb. 13 Twitter post it will halt minting new BUSD tokens effective Feb. 21.

3/ Paxos will continue to manage all outstanding BUSD reserves, ensuring all BUSD are always backed 1:1 with US dollar-denominated reserves held in bankruptcy remote accounts.

— Paxos (@PaxosGlobal) February 13, 2023

However, Paxos has said BUSD will remain fully supported and redeemable to onboarded customers through at least February 2024.

"New and existing Paxos customers will be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), a regulated US dollar-backed stablecoin also issued by Paxos Trust," Paxos said.

Related: SEC lawsuit against Paxos over BUSD baffles crypto community

New York State's Department of Financial Services, or NYDFS, reportedly received a complaint from stablecoin issuer Circle regarding Binance's reserves prior to its crackdown on BUSD.

Binance CEO Changpeng "CZ" Zhao says the exchange will continue to support BUSD despite issuer Paxos being ordered to stop minting the stablecoin by the U.S. SEC and New York regulators.

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