Paxos is a company that helps people use blockchain and issue digital tokens, namely stablecoins called BUSD (Binance USD), which are supposed to be backed by US dollars.
Stablecoins like BUSD are digital money that are designed to always be worth the same as real money, like US dollars. They can be used to buy things online, just like regular money, but they work on the blockchain, which is a special type of computer network. Learn more about stablecoins from our previous post here.
Trouble is brewing for Paxos because the Securities and Exchange Commission (SEC), which is a regulatory agency in the US that oversees financial markets, has sent a Wells notice to Paxos on February 3, 2023.
A Wells notice is a warning from the SEC that they might take legal action.
The SEC’s notice says that they are thinking about taking action against Paxos because they think that BUSD might be a type of investment called a security. If that’s true, then Paxos should have followed some special rules to make sure people know what they’re investing in. Paxos has said that they are aware of the notice and are cooperating with the SEC.
As directed by the New York Department of Financial Services (NYDFS), Paxos announced on February 13th that it will stop creating new BUSD tokens for the time being. However, the company emphasized that this pause on issuing new tokens will not affect existing BUSD holders, who will still be able to use their tokens as normal. Paxos says that it is committed to working with the SEC to address their concerns and ensure that BUSD is compliant with securities laws.
“I am holding BUSD, should I panic?“
If you are a BUSD holder and you are concerned about the recent news, you do not need to panic! According to Paxos, “existing BUSD tokens are fully-backed and redeemable through Paxos through at least February 2024”.
This means you have plenty of time to move to other stablecoins. Most of the money moved from BUSD to Tether.
It’s possible that there may be additional news or developments in the coming weeks and months. It is also best to continue to research and stay updated about news regarding Paxos and SEC. While Paxos has stated that existing BUSD tokens are still redeemable and usable, it is unclear how this situation will develop in the future. It is also possible that the SEC’s investigation may lead to changes in how BUSD tokens can be used and traded.
