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SEC drops inquiry into Paxos’ Binance USD (BUSD) with no enforcement action delivering key development in stablecoins’ regulatory context.
Paxos disclosed the latest development in a recent post on X, stressing that the U.S. Securities and Exchange Commission (SEC) quietly closed its investigation into the Binance USD (BUSD) stablecoin. They further announced the update in an official press release on Thursday.
“Paxos prevails in SEC investigation of BUSD stablecoin” 👏
On Tuesday, we received a formal termination notice from the SEC stating that it will not recommend enforcement action against Paxos Trust Company in the investigation of Binance USD (BUSD).
View the letter and our… pic.twitter.com/8kjysfsPg3
— Paxos (@Paxos) July 11, 2024
The termination of the investigation further bolsters the crypto industry’s pursuit of regulatory clarity. Notably, the industry has continued to grapple with regulatory uncertainty and a slew of enforcement actions from the SEC.
SEC Terminates BUSD Stablecoin Investigation
In a letter from SEC’s acting head of crypto assets and cyber unit, Jorge Tenreiro, on July 9, the agency informed Paxos that it would not recommend enforcement action. The decision comes a year after the Gary Gensler-led SEC sent Wells notice to indicate possible enforcement action alleging illegality over the dollar-backed BUSD stablecoin that Paxos issued in partnership with Binance.
Paxos downplayed the allegations, noting that the token is not a security and is 1:1 dollar-denominated reserves. The prolonged inquiry raised concerns within the crypto industry and aggravated the call for regulatory clarity.
Paxos said in its press release that the latest development will help unlock a widespread wave of stablecoin adoption by global enterprises. Paxos’ strategy head, Walter Hessert, hails the closure of the investigation as bringing renewed focus to the pursuit of enterprise partnerships.
Stablecoins’ Legal Victory
Concluding the inquiry is a monumental development when the stablecoin segment is witnessing progressive growth globally. To Paxos, the termination is timely days after securing approval from the Monetary Authority of Singapore (MAS) to offer Singapore-compliant stablecoins.
Meanwhile, the abandoned inquiry sets the stage for clarity in the stablecoin segment and the larger crypto scene. The securities regulator alleged Paxos’ BUSD stablecoin, a security in the charge against Binance last year.
Notably, court filings by the SEC argued that BUSD satisfied the investment contract requirement, thus a security under the Howey Test. Nonetheless, a federal judge dismissed the charges relating to the BUSD sale late last month.
The SEC’s move to halt the inquiry into Paxos follows the June 28 ruling by Judge Amy Jackson. The judge observed failure in the SEC to plausibly allege Binance’s offer to sell BUSD as an investment contract, holding that it is not a securities offering.
Circle chief executive Jeremy Allaire hails Thursday’s revelation as confirmation that payment stablecoins are payment money. Also, a recent X post by Bitwise investment strategist Juan Leon considers Paxos’ revelation a legal victory for stablecoins as they realize global traction.