As previously reported, US regulators apparently compelled a cessation in the utilization of BUSD – Binance’s dollar-based stablecoin managed by Paxos. The action represents another step in the tightening vice of crypto regulation. Paxos Trust is a regulated entity by the New York Department of Financial Services (NYDFS), so the firm may have been a bit surprised with the commandment issued by NYDFS.
A report by Reuters, referencing an internal Paxos email seen by the news firm, says Paxos is discussing with the Securities and Exchange Commission defending its position that its stablecoin is not a security.
The report quotes Paxos founder and CEO Charles Cascarilla, stating, “We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private,” adding, “The market has evolved, and the Binance relationship no longer aligns with our current strategic priorities.” Apparently, the decision to sever its relationship with Binance was independent of Paxos’ relationship with NYDFS.
At the same time, the report indicated that Paxos was ready to defend its position that its stablecoin is not a security via litigation.
The SEC claims that stablecoins should be regulated as a security as they are similar to money market funds and are not held by FDIC institutions. Congress is sorting through all of this with legislation expected at some point this year. In the meantime, regulators appear to be ready to confront stablecoin issuers – a vital variable in the cypto ecosystem.
