New York-based crypto company Paxos is pushing back against the idea that stablecoin Binance USD (BUSD) is a security.
In a statement released on Monday, Paxos says it received a “Wells Notice” from the Securities and Exchange Commission (SEC) on February 3rd, with the regulator stating that it is “considering recommending an action alleging that BUSD is a security and that Paxos should have registered the offering of BUSD under the federal securities laws.”
Paxos, however, says it “categorically disagrees” with the idea that BUSD is a security.
“We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.”
Paxos has faced a flurry of regulatory issues this week. On Monday, news broke that the New York Department of Financial Services (NYDFS) ordered the crypto company to freeze production of BUSD, which aims to maintain a peg to the US dollar.
Paxos subsequently announced on Monday that it would “end its relationship with Binance for the branded stablecoin BUSD.” The company also says all BUSD tokens have always and always will be backed by a 1:1 ratio of US dollar-denominated reserves.
Binance chief executive Changpeng Zhao sought to clarify his company’s relationship with the stablecoin on Monday. The CEO noted that BUSD is “wholly owned and managed by Paxos.”
“Binance will continue to support BUSD for the foreseeable future. We do foresee users migrating to other stablecoins over time. And we will make product adjustments accordingly. eg, move away from using BUSD as the main pair for trading, etc.
Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm.”
BUSD dipped close to the $0.99 range at one point on Monday but has largely maintained its desired peg to the dollar and is trading at an even $1.00 at time of writing.
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