SEC's Actions Against Binance Stablecoin Issuer May Have Major Implications On $137B Market

by Vandana Singh, Benzinga Editor
February 21, 2023 9:14 AM | 1 min read |
  • The Securities and Exchange Commission is reportedly preparing to take action against Paxos Trust Co, which could probably have significant implications for all stablecoins, including tether and USDC, the two largest, which are worth $110 billion combined.
  • Paxo issues stablecoin, a cryptocurrency designed to mirror real-world assets often backed by real assets such as bonds or cash in reserve. 
  • Last week, Paxos Trust was directed to cease minting a Binance-branded token with a market value of $16 billion.
  • "If the SEC charges Paxos, any other issuer of stablecoins should register or prepare for a court fight with the SEC," Renato Mariotti, a partner at BCLP, told CNBC.
  • While the SEC has not yet come out with specific charges, the notice to Paxos focuses on whether stablecoins are securities.
  • If BUSD is deemed a security by the SEC, the regulator oversees the stablecoin. Whatever company issues, BUSD would need to register with the SEC and accept more stringent regulations.
  • Another implication is that other stablecoins will also be given the same label.
  • "The basis for that action will necessarily be fact-specific to the Paxos BUSD structure but will likely have wide-ranging implications for other stablecoin issuers selling coins into the U.S.," Townsend Lansing, head of product at CoinShares, told CNBC.
  • One outcome of the fight can be that Paxos aggressively litigates against the SEC, making BUSD less attractive to the marketplace.
  • Another outcome could be that the SEC may regulate what assets are used to back stablecoins and the requirements for digital currency issues to make disclosures to the market.
  • If Paxos is unsuccessful, BUSD will no longer be sold, and other stablecoins may have to follow suit.
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