According to a Reuters report, Paxos, the first regulated blockchain infrastructure platform behind Binance’s BUSD stablecoin, is in discussions with the Securities Exchange Commission (SEC) following a regulatory crackdown on the industry.
According to the report, Paxos CEO Charles Cascarilla said in an email sent on Saturday that the company is in “constructive conversations” with the SEC. The discussion started after the SEC lawsuit, which alleges that the Binance-branded stablecoin is an unregistered security in US jurisdiction.
We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in person.
In addition, the Paxos CEO claimed that if necessary, the company would be willing to defend the position that BUSD is not a security through litigation.
Is the Paxos-Binance Partnership Over?
BUSD stablecoin issuer Binance has stopped minting the token following an order from the New York State Department of Financial Services (NYDFS). The company stated on February 21 that Paxos will stop issuing new BUSD tokens and will cooperate with the NYDFS.
Paxos said it will also “terminate its relationship” with the largest crypto exchange, Binance, following the SEC and NYDFS investigation.
BUSD is a stablecoin associated with the Binance crypto exchange. BUSD aims to provide a more stable cryptocurrency alternative for traders and investors who want to avoid the volatility of the digital asset market. Each BUSD token is pegged one-to-one to US dollars held in reserve.
While the SEC has not yet come up with specific charges, a notice issued by the NYFDS questions whether stablecoins are securities under the jurisdiction of the US watchdog. By doing so, other stablecoins will have the same label for the SEC. Paxos has stated that it does not agree to SEC enforcement because “BUSD is not a security under federal securities laws.”
On the other hand, Townsend Lansing, Head of Product at CoinShares, Europe’s most important digital asset investment and trading group, addressed the BUSD/Paxos dispute in a recent interview with CNBC, stating:
The basis for such action will likely be specific to the Paxos BUSD structure but will have broad implications for other stablecoin issuers selling coins to the US.
In addition, Lansing said that it is more likely that BUSD will no longer be sold in the US or available to American customers with access to US exchanges.
The SEC’s regulatory policies against the crypto industry could have many consequences for other stablecoin issuers in the US and could create further concerns in investor sentiment. This environment could impact any investment from US entities in the crypto space.
Stablecoins market capitalization is at $137 billion and has a share of 11.74% of the total crypto market cap, according to CoinGecko data. The total crypto market capitalization is $1.17 trillion, which represents a decrease of 0.96% in the last 24 hours. The market capitalization of the largest asset in the crypto industry, Bitcoin, is $475 billion, which represents a dominance of 40.64%.
Feature image from Unsplash, chart from TradingView.