The United States SEC may be getting ready to bring penalties against the firm for issuing the Binance USD (BUSD) stablecoin following the Wells Notice it issued to Paxos Trust earlier this month.
According to a report (1) by CNBC, the SEC has not yet begun an official action, and analysts have mentioned that the expenses of such a move will be enormous for the $137 billion sector.
Stablecoins are a type of cryptocurrency whose values do not vary depending on the mismatch of supply and demand. The Binance USD token is a stablecoin, just like every other stablecoin.
Binance is intimately connected to the Binance Exchange and is traded on several exchanges worldwide, including those in the United States.
It is still unknown what charges the SEC may wish to bring against Paxos about the BUSD stablecoin; nevertheless, specialists are looking into several securities violations.
The SEC is infamous for leveling allegations against cryptocurrency companies, and one of the most majors of these charges was leveled against Ripple Labs Inc., a blockchain payments company.
Several smaller crypto companies tend to agree with the SEC, pay a minor fine, and then back off the conduct that led to the charges being brought against them.
Despite predictions, the contrary will likely occur with Paxos, given that the company has categorically stated that it does not conform with the SEC's tagging of BUSD as a security. Specifically, Paxos has stated that it does not agree with the classification of BUSD as a security.
The company disclosed that it intends to clear up any confusion regarding its business model involving the BUSD with the relevant regulator through litigation if necessary.
Even though industry watchers feel that the move will be expensive for Paxos and render the BUSD undesirable as a stablecoin in the United States, the company will likely go all the way, much like Ripple did.
New Standard for Stablecoins
Ripple has stated that one of the reasons it has been fighting the SEC is that it does not want the agency to set a precedent that could be detrimental to the overall ecosystem of digital currencies.
If the commission led by Gary Gensler can charge Paxos for issuing BUSD, then all the other stablecoin lenders in the US should get ready to register and pay some fines.
This conflict between Paxos and the SEC will follow a similar path, as it will follow a similar path, as if the commission can effectively charge Paxos for the issuance of BUSD, then it will follow similar path.
According to Renato Mariotti, a lawyer at the legal firm BCLP, who CNBC interviewed,
"If the SEC charges Paxos, every other issuer of stablecoins must register or brace for a court fight with the SEC."
The legal precedent will affect US stablecoin issuers and Tether Holdings Ltd, the issuer of the most popular stablecoin in the world, USDT. Numerous industry professionals have expressed their fear that the SEC, by the use of its regulation by enforcement strategies, is attempting to isolate the United States from future developments in the financial sector.
Now, only time will tell the extent to which the SEC will continue with its Paxos crackdown while heeding prudence or whether or not it will not.