Paxos ‘Categorically Disagrees’ With SEC That BUSD Is a Security, Says It Will Litigate if Needed

The stablecoin issuer confirmed it has received a Wells Notice from the SEC, indicating a possible enforcement action is forthcoming.

AccessTimeIconFeb 13, 2023 at 9:14 p.m. UTC
Updated Feb 13, 2023 at 11:37 p.m. UTC

Stablecoin issuer Paxos acknowledged that it has received a Wells Notice from the U.S. Securities and Exchange Commission, indicating a possible enforcement action based on the charge that its Binance USD constitutes an unregistered security, according to a Monday press release. BUSD is a stablecoin branded by Binance that’s pegged to the U.S. dollar.

But the firm said it “categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws.” It also claimed that Paxos is “always backed 1:1 with U.S. dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,” and said the firm is “prepared to vigorously litigate if necessary.”

Earlier on Monday, Paxos said it would stop minting new BUSD tokens at the direction of the New York Department of Financial Services (NYDFS). CoinDesk had earlier reported that Paxos was under investigation by the NYDFS.

Paxos also noted in its press release that the Wells Notice specifically had to with BUSD and not any other part of its business. “This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos,” Paxos wrote.

Paxos did not immediately respond to a request for additional comment from CoinDesk.

The Block earlier reported on Paxos’ comments.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Nelson Wang

Nelson Wang was CoinDesk's news editor for the East Coast. He holds BTC and ETH above CoinDesk's disclosure threshold of $1,000.