SEC Will Not Take Enforcement Action Against Paxos

The United States Securities and Exchange Commission (SEC) plans to drop its investigation into the stablecoin issuer Paxos and will not file an enforcement case.

In a letter dated July 9, Jorge Tenreiro, acting chief of the crypto assets and cyber unit, stated that the SEC would not recommend an enforcement action against Paxos concerning the Binance USD (BUSD) token. Paxos had received an SEC Wells notice in February 2023, which claimed that BUSD was an unregistered security and that Paxos had violated federal securities laws.

“Paxos Trust Company has consistently argued that its USD-backed stablecoins are not securities under federal securities laws and that the Wells notice was unjustified,” Paxos said in a statement on July 11. “We are pleased with our persistent advocacy for stable-value digital assets and the SEC staff’s decision not to bring enforcement action against Paxos regarding BUSD.”

July 9 letter from SEC to Paxos. Source: Paxos

The SEC’s decision to drop its investigation came after several court rulings against the regulator, including cases involving tokens as securities. In July 2023, a federal judge ruled in SEC v. Ripple that the XRP token was not a security in the context of programmatic sales on digital asset exchanges. In June 2024, the judge overseeing the SEC’s case against Binance dismissed a claim related to BUSD, citing the Ripple ruling.

As of the publication date, the SEC has ongoing enforcement actions against several crypto firms, including Ripple, Binance, Kraken, and Coinbase. However, these lawsuits may need to be reevaluated following a Supreme Court ruling that no longer requires courts to defer to federal agencies in interpreting policies.