In what could be a major victory for stablecoin issuance and regulation in the United States, the Securities and Exchange Commission (SEC) has decided to drop its investigation into Paxos, providing a major boost to the stablecoin industry.
According to a report from Fortune on the matter, the decision was communicated to Paxos by Jorge Tenreiro, acting head of the SEC’s crypto assets unit, and comes more than a year after the regulator sent a Well Notice to the New York-based institution, indicating possible enforcement action on the Binance USD stablecoin, or commonly referred to as BUSD, which Paxos developed in partnership with Binance.
Paxos emerges from a year-long well Shadow Note
According to reportWalter Hessert, Paxos’ chief strategy officer, expressed relief at the conclusion of the survey, saying it was in line with their expectations and provided much-needed certainty to the market.
Paxos initially launched BUSD in partnership with Binance in September 2019. While BUSD has not surpassed its competitors Tether’s USDT and Circle’s USDC in terms of market dominance, it has earned its status as a widely used stablecoin largely due to its integral role within the Binance ecosystem.
While BUSD maintained a peg to the US dollar, the SEC later asserted in a lawsuit against Binance that the stablecoin should be classified as an investment contract and therefore a security under the Howey Test, which many crypto participants consider an outdated framework for regulating the crypto market.
BUSD is validated as non-secure
Paxos, in response, disputed the SEC’s characterization, saying that BUSD was fully backed by dollar-denominated reserves at a 1:1 ratio, without delving into the agency’s claims regarding profit distribution.
The investigation has lasted more than a year, the SEC confirmed in response to a Freedom of Information Act request from Fortune, with the agency listing its status as active and ongoing as of July 3.
However, it appears that the SEC’s stance has changed following a federal judge’s June 28 ruling, which favored Binance and concluded that the sale of BUSD did not constitute an offering of securities, leading to the charges being dismissed.
At the time of writing, Binance’s native token, BNB, is trading at $532, up 1% over a 24-hour period.
Featured image of DALL-E, chart from TradingView.com
