More than a year after the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to blockchain infrastructure company Paxos, the regulator said it is dropping its investigation and does not intend to bring an enforcement action.
Paxos said it had received a formal termination notice on Tuesday from Jorge Tenreiro, the acting unit chief for the SEC’s Crypto Assets and Cyber Unit, notifying the firm that no impending action would come from the SEC’s investigation of Paxos related to the Binance USD (BUSD) stablecoin.
“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified,” said Paxos in a statement.
Around the same time as the SEC’s Wells Notice to Paxos in February 2023, the New York Department of Financial Services (NYDFS) ordered the firm to cease minting BUSD, citing “several unresolved issues” related to the oversight of its relationship with Binance in regard to BUSD. Stablecoin issuer Circle was reportedly the one to notify the NYDFS that BUSD’s reserves were not adequately backed.
While many interpreted the news as something that officially puts BUSD in the clear, in many ways, the damage to the stablecoin has already been done. BUSD’s market capitalization has dropped $16 billion before the SEC’s Wells Notice last February to just $69.5 million at the time of writing.
“So they made them shut down the stablecoin, which damaged Paxos and Binance heavily, for no reason? And there are no repercussions for the SEC? What an insanely broken and rigged system,” commented pseudonymous X user Aylo.
