Supporter of Binance stable coin claims that the U.S. SEC has classified the token as an unregistered security.
London/Washington, Feb. 13 (Reuters) – The U.S. Securities and Exchange Commission (SEC) has informed the company it should have registered the product as a security and is considering taking action against the platform, according to Paxos Trust Company, the company that created Binance’s stablecoin.
Paxos said it disagrees with the SEC’s claims that Binance USD is a security and is “prepared to robustly defend if necessary” in a statement on Monday.
Although Chair Gary Gensler has previously stated he thinks some stablecoins are securities, the action is one of the SEC’s first on stablecoins.Later, a NYDFS representative claimed in an email to Reuters that Paxos had broken its promises to conduct “tailored, periodic risk assessments” and “due diligence checks” on Binance and Binance USD consumers in order to prevent “bad actors from exploiting the platform.”
In a statement, Paxos said that starting on February 21, it would stop creating new Binance USD, which is backed by conventional cash and U.S. Treasury bills, but would keep supporting and redeeming the tokens through at least February 2024.The announcement comes hours after the New York Department of Financial Services (NYDFS) said in a consumer alert it has ordered Paxos to stop minting Binance USD, citing “unresolved issues” in Paxos’ oversight of its relationship with Binance.There are “unmistakably no further charges” against the corporation, according to Paxos, which later confirmed that the SEC had put the company on notice.Paxos stated in the statement, “Paxos has always placed a priority on the safeguarding of its clients’ assets.According to an SEC spokeswoman, the organisation won’t comment on whether or not there is or isn’t a potential inquiry.
Stablecoins, which are digital tokens backed by conventional assets and intended to maintain a constant value, have become one of the most important components of the cryptocurrency system. They are employed in some emerging markets to facilitate trading between erratic tokens like bitcoin.Binance would “continue to support BUSD for the foreseeable future,” Zhao said, predicting that users would shift to “other stablecoins over time.”
The NYDFS move, first reported by the Wall Street Journal, comes amid a wider crackdown on cryptocurrencies and Binance by U.S. regulators. The Justice Department is investigating Binance for suspected money laundering and sanctions violations,