SEC Threatens Lawsuit Against Binance BUSD Stablecoin-Issuer Paxos – What’s Going On?

cryptonews.com:

The Securities and Exchange Commission (SEC) has said it intends to sue Paxos Trust Company, a regulated New York-based firm that issues several popular stablecoins.

The threat of a lawsuit from the SEC came in the form of a letter to Paxos. The letter is a so-called Wells notice, used by the regulator to notify companies of possible enforcement action taken against them.

Paxos issues both the Pax Dollar (USDP) and the popular Binance USD (BUSD) stablecoins, and is regulated by the New York State Department of Financial Services.

According to a Wall Street Journal report that cited sources “familiar with the matter,” the notice alleged that Paxos’ dollar-pegged BUSD stablecoin is an unregistered security. The stablecoin is issued by Paxos for Binance, but it is also traded on several other crypto exchanges, including Coinbase.

The report added that it was unclear whether the notice related to the issuing of BUSD, the listing of the coin on exchanges, or both.

Paxos has so far not commented on the story, but Binance CEO Changpeng Zhao (CZ), said in a Twitter thread on Sunday that “funds are SAFU!”

According to CZ, the only thing that will change in practice for now is that Paxos will no longer mint new BUSD tokens.

“As a result, BUSD market cap will only decrease over time,” he wrote. The Binance CEO added that Paxos “will continue to service the product, and manage redemptions.”

Despite these reassurances, CZ admitted that users will likely migrate to other stablecoins “over time.” He said Binance will make the necessary adjustments internally, including “move away from using BUSD as the main pair for trading.”

BUSD currently has a market cap of close to $16 billion, and ranks as the third largest stablecoin after tether (USDT)