SEC Drops Paxos Investigation Without Enforcement Action

On July 9, Jorge Tenreiro, the acting chief of the SEC's crypto assets and cyber unit, announced this decision in a letter to Paxos.

This follows the SEC's issuance of a Wells notice to Paxos in February 2023, which alleged that BUSD was an unregistered security and that Paxos had violated federal securities laws.

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Paxos responded to the decision with a statement on July 11, expressing their long-standing position that their USD-backed stablecoins are not securities, adding:

The Wells Notice was unwarranted and unjustified. We are proud of our relentless advocacy for stable-value digital assets and that the SEC staff determined it will not bring enforcement action against Paxos in connection with BUSD.

The SEC's move to drop the investigation came after several judicial setbacks in similar cases. One notable case involved Ripple, where a federal judge ruled in July 2023 that XRP tokens were not securities in programmatic sales on digital asset trading platforms.

Currently, the SEC is engaged in ongoing lawsuits against several cryptocurrency firms, including Ripple, Consensys, and Uniswap.

The SEC's decision not to pursue enforcement action against Paxos marks a significant moment in the regulatory environment for crypto, particularly stablecoins.