SEC Targets Paxos Trust and Binance USD
The U.S. Securities and Exchange Commission (SEC) intends to file a lawsuit against Paxos Trust, the owner and issuer of Binance USD, the third-largest stablecoin in the world, for breaking investor protection rules, according to recent Wall Street Journal reporting.
Paxos stops producing BUSD coins and cuts ties with Binance
According to Paxos, it will stop producing BUSD and sever its ties to Binance for the stablecoin. According to the press statement sent to Decrypt, Paxos has been instructed to stop issuing BUSD by the New York Department of Financial Services, the organization with which it is registered and regulated.
Paxos and BUSD Partnership
Since signing a license arrangement with Binance, the biggest cryptocurrency exchange in the world, in 2019, Paxos Trust has been in charge of the BUSD stablecoin market. Paxos was granted permission under the agreement to utilize the Binance name and trademark. BUSD now has a market valuation of approximately $16 billion, according to CoinGecko, mostly because of its connection to Binance.
Result for Binance
Binance has been harmed by the revelation, as the cryptocurrency exchange may lose out on licensing payments and see a decrease in Binance USD’s marketing clout. Following the news, the non-stablecoin token of Binance, Binance Coin (BNB), dropped 5%.
SEC Boosts Regulatory Initiatives
The SEC has recently stepped up its regulatory efforts in the cryptocurrency sector. The SEC and cryptocurrency exchange Kraken last week negotiated a $30 million settlement over the staking service Kraken provided to American consumers. The “runway is getting pretty short” in terms of compliance, the SEC Chair Gary Gensler has cautioned crypto firms. Gensler, however, is not the only SEC member who supports the regulator’s anti-crypto campaign. Hester Peirce, an SEC commissioner, dissented from the authorities’ decision to settle with Kraken last week, claiming that they “do not launch a public process to design a functioning registration procedure that gives useful information to investors, [we] just shut it down.”