Market Analysis Report (13 Feb 2023)

Stablecoin issuer Paxos Trust has been told by the U.S. Securities and Exchange Commision (SEC) the regulator is planning to sue it for violating investor protection laws in a letter known as a Wells notice, which it uses to inform entities of possible enforcement action.

The notice, according to the Wall Street Journal, alleges Binance USD (BUSD) is an unregistered security. BUSD is a Binance-branded stablecoin issued by Paxos and listed on several exchanges, including Paxos’ itBit platform.

After receiving a Wells notice, companies have a chance to write back to the SEC and explain why they should not move forward with a lawsuit. Receiving these notices does not automatically mean that the SEC will take enforcement action.

A final decision to proceed with a settlement or litigation lies with the five commissioners of the agency, who must vote to approve it.

The New York Department of Financial Services (NYDFS) has launched an investigation into the company and ordered Paxos to stop the issuance of BUSD. Paxos will continue to manage redemptions for the stablecoin.

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• Source: https://www.cryptocompare.com/email-updates/daily/2023/feb/13/