Paxos: Binance BUSD Is Not a Security

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axos has asserted that their Binance USD stablecoin does not qualify as a security after undergoing two separate tests. The issuer is actively working alongside the SEC to ensure compliance with all regulations.

On February 21, Charles Cascarilla - the Chief Executive Officer of Paxos - released a letter to make known his thoughts on the misadventure involving their BUSD stablecoin.

On February 13, due to action from New York regulators, Paxos was forced to cease production of its Binance USD (BUSD) stablecoin. Meanwhile, the U.S Securities and Exchange Commission issued a Wells Notice that implies that BUSD is considered as an asset class by the SEC.

Refuting the claim, Cascarilla proclaimed in a statement released today that the company stands firm on their stance:

“Under [the Howey and Reves tests], BUSD does not meet the criteria to be a security. Our stablecoins are always backed by cash and equivalents–dollars and US Treasury bills, but never securities.”

The Howey Test classifies a plethora of investment contracts as securities, and the Reves test applies the "family resemblance" procedure to decide whether an asset can be classified as such. Thus, Paxos is committed to proving that BUSD doesn't fit any security-related qualities in its entirety.

Cascarilla disclosed that Paxos is engaging in confidential, yet productive conversations with the U.S. Securities and Exchange Commission (SEC). He added that they will communicate further details when appropriate to do so.

He went on to state that Paxos may "defend its stance in court", which reiterates earlier comments by the company indicating a willingness to “vigorously litigate if needed.” If they decide to do so, this will make them one of only a few high-profile cryptocurrency firms — Ripple, LBRY, Telegram and Kin included — who have taken up arms against the SEC.

Cascarilla noted that Paxos has successfully processed over $2.8 billion in Binance USD redemptions, with no disruption to the crypto market whatsoever. This achievement even surpasses the already impressive figure of $300 million reported by Crypto Slate on February 14th! Carrying out such a huge number of redemptions without any technical difficulties is nothing short of remarkable and speaks volumes about Paxos's capabilities.

Cascarilla remarked that Paxos is collaborating with regulators on other topics as well. Their aim is to obtain a bank charter from the Office of the Comptroller of the Currency (OCC) and also become a clearing agency by filing an application at SEC. With this move, they are confident to reach their goals soon!

Jonathan

An editor at Coincrop

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Jonathan is a Coincrop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.