Paxos, the issuer of Binance USD (BUSD), is currently in discussions with the US Securities and Exchange Commission (SEC). These discussions are over the regulator’s decision to classify BUSD as a security. The CEO of Paxos, Charles Cascarilla, reportedly informed employees that the company is having “constructive discussions” with the SEC. He is also planning to continue the conversation in private in hopes of reaching an agreement.
Cascarilla emphasized that Paxos is willing to defend its position that BUSD is not a security, even if that means litigation. As mentioned before, Paxos is the issuer of BUSD, a stablecoin that is associated with Binance, the largest cryptocurrency exchange in the world. BUSD is pegged one-to-one with the US dollar.
Last week, the New York State Department of Financial Services ordered Paxos to halt the minting of new BUSD tokens. This comes due to “unresolved issues” related to Paxos’ relationship with Binance. It was later revealed that the SEC had threatened to sue Paxos over its BUSD issuance, claiming that the stablecoin is an unregistered security.
Following this crackdown, Paxos announced that it would stop issuing new BUSD tokens from February 21. However, the issuer stated that it will continue to support and redeem the tokens until at least February 2024. Cascarilla also informed employees that Paxos is no longer interested in its partnership with Binance since the relationship does not align with the company’s strategic priorities. Paxos is still working with the SEC to obtain a license. The company is also seeking approval for its national trust bank charter from the US OCC.
Binance Exploring Alternative Issuers After Paxos-SEC Dispute
Meanwhile, Binance is also exploring options beyond Paxos and dollar-based stablecoins amid increasing regulatory scrutiny in the US. The exchange is allegedly planning to launch a stablecoin that is not based on the US dollar. The company plans to do so through collaboration with private and public entities. Nevertheless, CZ Binance is still publicly in support of BUSD. As per one of his tweets, Binance is going to continue supporting BUSD “for the foreseeable future.” Nevertheless, he is aware that the accusations raised by the SEC toward Paxos are pushing users to use other stablecoins.
The ongoing discussions between Paxos and the SEC highlight the challenges faced by stablecoin issuers in navigating the regulatory landscape. Despite these challenges, Paxos and Binance remain committed to innovation and improving their services.