The U.S. SEC Appears to Be Pulling Back on Its Stablecoin Crackdown

The U.S. Securities and Exchange Commission (SEC) appears to be pulling back on its stablecoin crackdown.

The U.S. Securities and Exchange Commission (SEC) has decided not to pursue enforcement action against Paxos over its Binance-affiliated stablecoin BUSD, according to a July 11 SEC termination notice.

The regulator had been investigating BUSD to determine whether it should be classified as a security asset. In July 2022, the SEC sent Paxos a Wells Notice regarding the stablecoin, indicating that the regulator planned to take enforcement action against the firm.

However, a federal judge ruled two weeks ago that BUSD sales by Binance did not constitute a securities offering. The SEC’s decision not to pursue enforcement action against Paxos may have been influenced by this ruling.

The SEC had previously argued that BUSD, despite being pegged to the U.S. dollar, acted as an investment contract and therefore a security. However, Paxos maintained that its USD-backed stablecoins were not securities under federal securities laws.

“We believe this development will unlock a new wave of stablecoin adoption by leading global enterprises,” Paxos said in a statement following the SEC’s decision.

The SEC’s decision comes nearly 18 months after it began its investigation into Paxos over BUSD. The regulator also joined the New York Department of Financial Services in ordering Paxos to stop issuing the stablecoin.

According to CoinGecko, BUSD’s market cap has fallen by more than 95.5% since then, from $15.9 billion to $69.5 million.

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