• Paxos CEO Charles Cascarilla has stated in an internal communication that Paxos would strongly contest in court that BUSD is not a security.

• Cascarilla also mentioned that Paxos is working with SEC to file an application to obtain a clearing agency license.

Recently, The New York Department of Financial Services ordered Paxos Trust Co. to stop creating Binance US Dollar (BUSD). This came after the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice against Paxos over claims that BUSD is unregistered securities. According to recent reports, Paxos CEO Charles Cascarilla has been in touch with the Agency over the restrictions. The company stated emphatically that it disagrees with SEC’s position on BUSD. 

According to Paxos, the stablecoin is not securities under the Federal Securities Law. Also, Cascarilla has stated in an internal communication that Paxos would strongly contest in court that BUSD is not a security. Reuters has also disclosed that the company CEO has sent an email to the employees about its continuous engagement with the agency. 

We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private.

Paxos would keep supporting BUSD for now

Paxos stated that it will continue to support and redeem BUSD until February 2024. In addition, the decision to end all relationships with Binance has nothing to do with the NYDFS directive and its engagement with the SEC. 

The market has evolved and the Binance relationship no longer aligns with our current strategic priorities.

Cascarilla also mentioned that Paxos is working with SEC to file an application to obtain a clearing agency license. It is also in contact with the U.S. Office of the Comptroller of the Currency (OCC) to obtain final approval for a national trust bank charter.

Over the years, stablecoin issuers such as Paxos have benefitted by issuing and investing customers’ cash deposits in short-term US Treasury. According to reports, this has enabled companies to earn more yields in the period interest rates continue to be raised by the U.S. Federal Reserve. Several questions have been raised about whether the BUSD falls within the demand of the Howey Test. Interestingly, some experts believe that BUSD does not pass the Howey Test, and cannot be labeled as security. 

Binance CEO Changpeng Zhao has in response to this call for support for stablecoins pegged to fiat currencies other than the US dollar. According to on-chain activities, Binance is moving towards capitalizing on the shift by providing support for other stablecoins.

A Whale Alert notice has observed that Binance has just minted TrueUSD (TUSD) in large quantities. According to reports, about 49 million TUSD were minted by the exchange. 

CZ agrees with Miles Deutscher’s tweet

CZ admitted that he is not an expert in US Law, and has no additional information about the case relating to the SEC and BUSD. However, he agrees with the comments of crypto analyst Miles Deutscher. Deutscher tweeted: 

The SEC has labeled BUSD as an ‘unregistered security,’ and is suing its issuer, Paxos. But how on earth is a stablecoin considered a security, when it clearly doesn’t meet the Howey Test criteria? No one has ever had ‘the expectation of profit’ when buying BUSD.