The US Securities and Exchange Commission (SEC) could be preparing legal action against Paxos, as reported by CNBC.
According to the report, the move could have significant implications for the broader $137 billion market.
Of note, stablecoins are a type of cryptocurrency that are designed to mirror real-world assets, such as the US dollar. They are often backed by real assets, such as bonds or cash. They have become the backbone of the crypto market, as they allow investors to quickly trade different assets without having to make fiat currency conversions.
Paxos issues Binance USD (BUSD), a stablecoin that is “pegged” to the US dollar at a 1-to-1 ratio, and is issued in partnership with Binance, one of the world’s largest cryptocurrency exchanges.
Last week, New York’s financial industry supervisor ordered Paxos to stop issuing BUSD.
Separately, Paxos said the SEC is considering proposing a recommendation that BUSD is a security. According to the company, the recommendation proposes to register the BUSD offering under the federal securities laws.
The SEC has not yet taken formal action on the issue, but such a move is worth considering as initiating a formal proceeding would have huge implications for all stablecoins, such as tether and USDC which have a combined value of $110 billion.
“If the SEC charges Paxos, every stablecoin issuer should prepare for litigation with the SEC,” said Renato Mariotti of BCLP.
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