The crypto company Paxos Trust may face a legal hurdle for its Binance USD, or BUSD, token. According to a Wall Street Journal report, the SEC intends to sue the firm for violating investor protection laws.
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The report stated that the SEC had sent a Wells notice to Paxos. It’s worth highlighting that the SEC sends this notice when it plans to charge a firm for violating securities laws.
Per the notice, Binance USD, a price-stable cryptocurrency pegged against the U.S. dollar, is an unregistered security. Paxos partnered with the world’s biggest cryptocurrency exchange, Binance, to launch BUSD in 2019.
Meanwhile, in the latest development, Paxos has been told by the New York Department of Financial Services to stop creating more BUSD tokens. However, Paxos could continue to manage redemptions of the product.
The move comes amid a growing regulatory crackdown on the crypto industry. This could hurt the recovery of Bitcoin (BTC-USD) and Ethereum (ETH-USD), the two major cryptocurrencies.
Both coins remain highly volatile. Bitcoin, which marked a recovery in 2023, has dropped about 6% in the past five days. Meanwhile, Ethereum lost nearly 10% of its value.
