SEC to Sue Crypto Trust Co. Paxos In Relation To Binance Stablecoin

The U.S. Securities and Exchange Commission (SEC) is planning to file a lawsuit against stablecoin issuer Paxos, the company behind the Pax Dollar (USDP) and Binance USD (BUSD) tokens, according to the Wall Street Journal. The SEC claims that BUSD is an unregistered security.

A spokesperson for the SEC declined to comment on the existence of a potential investigation. This development comes shortly after the New York Department of Financial Services began investigating Paxos, although the scope of the investigation is unknown.

Paxos, a New York-regulated trust company with a provisional charter from a federal bank regulator, has announced that it will cease minting new BUSD tokens. Binance, which owns and manages BUSD, stated that the funds are secure and fully covered by reserves in banks. In light of the regulatory uncertainty, Binance is reviewing other projects in affected jurisdictions to protect users.

This news follows the SEC settling charges with crypto exchange Kraken, which allegedly offered unregistered securities through its staking services. Kraken did not admit or deny the charges and has discontinued its U.S. staking programs.

Binance recently admitted to not always maintaining the correct balance to back Binance-Peg BUSD (PBUSD), a version of BUSD offered on non-Ethereum networks that is backed by BUSD. However, Binance claimed that while there were issues with the publicly displayed data, user redemptions were not affected.