The US Securities and Exchange Commission (SEC) is now putting pressure on Paxos Trust, the issuer of the Binance token, to register the token as a security. According to CEO Charles Cascarilla, he is in negotiations with the SEC and will take legal action if necessary.
Stable coins are popular among crypto traders because they provide an exit from volatile cryptocurrencies, such as bitcoin, while acting as a hedge against inflationary pressures. In addition, by excluding bank settlements from transactions, these coins help avoid missed trading chances due to long processing times.
This led to increased regulatory oversight of the emerging stablecoin industry, as a result of which the New York Financial Services Department ordered Paxos to stop distributing BUSD tokens when it was discovered that they had failed to conduct regular risk assessments and security checks on Binance and those who possessed BUSD.
Although the issuance of new tokens has been suspended, previously issued tokens will remain valid for one year. As for the SEC's intention to bring charges against Paxos for violating investor protection laws, so far the SEC has not taken such steps against any major stablecoin issuer.
However, last autumn the regulatory authority drew attention to a report from Circle, the issuer of the popular USDC stablecoin, that BUSD savings could be unclear and potentially deficient.