- The U.S. Securities and Exchange Commission (SEC) enforcement division has issued a Wells notice to Paxos.
- Paxos was recently under investigation by the New York Financial Services Department, according to CoinDesk.
New York Regulators Order Paxos to Stop Minting BUSD Stablecoin
The New York Department of Financial Services (NYDFS) has ordered Paxos, a blockchain company, to stop minting its dollar-pegged Binance USD (BUSD) stablecoin. However, Paxos is expected to continue managing the redemptions of the product.
The regulator’s actions come after the Securities and Exchange Commission (SEC) issued a Wells notice informing the stablecoin issuer of its plans to sue it. In the notice, the SEC alleges that the stablecoin is a security.
A Wells notice is a formal communication from the SEC that gives a company 30 days to respond to allegations of wrongdoing before the SEC files a lawsuit.
The SEC’s decision to sue Paxos is a significant development in the regulation of stablecoins. Stablecoins are digital tokens that are pegged to a fiat currency, such as the US dollar. They are often used to facilitate transactions on cryptocurrency exchanges and to provide a store of value for investors.
The SEC has been concerned about the potential for stablecoins to be used for illegal activity, such as money laundering. The agency has also been concerned about the lack of regulation of stablecoins.
The SEC’s decision to sue Paxos could have a significant impact on the future of stablecoins. If the SEC is successful in its lawsuit, it could set a precedent that would make it more difficult for other stablecoin issuers to operate in the United States.
The SEC’s decision to sue Paxos is also a sign of the growing regulatory scrutiny of the cryptocurrency industry. The agency has been taking a number of steps to regulate cryptocurrencies, including issuing guidance on how companies should comply with securities laws.
The future of stablecoins in the United States is uncertain. However, the SEC’s decision to sue Paxos is a sign that the agency is taking a serious look at the risks posed by stablecoins.