02-13-2023 icon

SEC to sue Paxos over BUSD

By Lucy Adegbe

The U.S. Securities and Exchange Commission (SEC) has planned to sue Paxos over the issuance of dollar-pegged Binance stablecoin (BUSD), the Wall Street Journal reported Sunday.

Paxo is the issuer of Paxos USD (PUSD) and BUSD.

An SEC spokesperson told the press that the commission does not comment on the existence or nonexistence of a possible investigation.

The SEC alleges that BUSD is an unregistered security, according to the report. BUSD is a Binance-branded stablecoin issued by Paxos, a New York-regulated trust company that also enjoys a provisional charter from the Office of the Comptroller of the Currency, a federal bank regulator.

Following the news of SEC’s intentions, Paxos said it would halt the minting of new BUSD tokens.

A Binance spokesperson told CoinDesk: “BUSD is a stablecoin wholly owned and managed by Paxos. As a result, BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow up with additional information as required. Paxos also assured the funds are safe, and fully covered by reserves in their banks.

“Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from further undue harm.”

Binance acknowledged last month that it had not always maintained the proper balance to back Binance-Peg BUSD (PBUSD), a wrapped version of BUSD offered on non-Ethereum networks that are backed by BUSD. 

After Bloomberg reported that there were issues with how PBUSD’s backing was displayed, Binance said on occasion in the past, there was a timing mismatch in backing Binance-Peg BUSD with BUSD.