Following legal battles against Binance stablecoin BUSD, the New York Department of Financial Services (NYDFS) has ordered blockchain company Paxos to stop issuing BUSD as per a report.
The restriction was imposed following the United States Securities and Exchange Commission (SEC) issuance of a “wells notice” to Paxos, informing the company of an enforcement action.
According to a Feb. 12 report by the WST, SEC informed Paxos that Binance USD has been classified as an unregistered security; as such, it violates investor protection laws under SEC rules and regulations.
Based on statutory laws, the accused is expected to respond within 30 days after a Wells Notice has been received. This would be done via a legal brief known as a Wells Submission.
While the NYDFS recent proclamation maintains that Paxos should seize minting BUSD stablecoin, Binance upholds the stance that Paxos will continue to manage redemptions of the products.
As at present, BUSD is the third largest stablecoin according to data from CoinMarketCap. It is interesting to see how BUSD will sail through amid SEC’s regulation.
US SEC on Rampage
There is no mincing word that the US Securities and Exchange Commission (SEC) is on a rampage following its series of clampdowns on crypto firms. On Feb. 9, SEC shutdown the Kraken exchange crypto staking program for violating its rules.
Meanwhile, the decision generated controversy within the SEC agency as one of its commissioners, Hester Peirce, publicly criticized the institution for adopting a decision that is not efficient and fair for the emerging industry.
In the same vein, SEC has placed Gemini crypto exchange and Genesis Global Capital under scrutiny for both offering unregistered securities through Gemini’s Earn program.
It was argued then that both crypto firms violated the disclosure requirements provided to protect investors engaging in any digital assets. While the case is still lingering and yet to be settled, Nexo agreed to pay SEC $45 million settlement deal.
More than any other time, crypto firms should review SEC laws and ensure that they adhere strictly to avert undue litigation and charges. On the other hand, SEC should also be clear with its rules and regulations.
