Paxos, company behind Binance USD, reportedly in ‘constructive’ talks with US SEC as regulators tighten focus on crypto companies
The company behind the Binance-branded “stablecoin” token Binance USD, Paxos Trust Company, is in “constructive” talks with US federal securities regulators, according to a report.
“We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private,” Paxos chief executive Charles Cascarilla said in a Saturday email to Paxos employees, according to a Tuesday report by Reuters.
Last week New York City-based Paxos said it would stop minting the BUSD token after receiving an order from the New York Department of Financial Services.
It said it would stop distributing new coins as of 21 February, but would continue supporting them and redeeming existing coins until at least February 2024.
The SEC, like the New York regulator, indicated to Paxos BUSD should have been registered as a security, Cascarilla said.
Cascarilla wrote that Paxis disagreed that BUSD is a security, and would defend its position in court if necessary.
Cascarilla said in the email that Paxos’ decision to end its relationship with Binance was unrelated to the regulator’s warning.
“The market has evolved and the Binance relationship no longer aligns with our current strategic priorities,” he wrote.
BUSD is the third-biggest stablecoin in circulation, with $16 billion (£13bn) in circulation.
Stablecoins are popular with crypto traders as they allow one coin to be quickly converted to another without having to first be converted into a fiat currency.
But they have come under regulators’ crosshairs after the spectacular collapse last year of one of the biggest stablecoins, TerraUSD, which wiped out nearly $45bn in market capitalisation within a week.
The SEC’s interest in Paxos and BUSD come at a time when it is reportedly considering taking action against Binance, the biggest cryptocurrency exchange.
Binance has remained relatively aloof from regulators, who have increasing concerns about the exchange in areas ranging from money laundering to violations of securities laws.
The US Justice Department is investigating Binance for suspected money laundering and sanctions violations, Reuters reported last year, while Bloomberg reported in 2021 that US officials were investigating whether Binance employees engaged in insider trading.
Binance has denied wrongdoing and said at the time of the Bloomberg report it had a “zero-tolerance” policy for insider trading.
The UK and European Union, as well as Hong Kong and other governments, are planning stronger cryptocurrency regulations in order to bring the digital assets out of their current legal grey area.