The firm behind Binance’s stablecoin, Paxos Trust Company, is in discussions with the U.S. Securities and Exchange Commission after the regulator told the company it should have registered the token as a security, according to an internal email from Paxos’ chief executive officer.
“We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private,” said Paxos CEO Charles Cascarilla in an email sent on Saturday to Paxos employees which was seen by Reuters.
He added that if necessary, Paxos would defend its position that Binance USD is not a security through litigation.
An SEC spokesperson declined to comment. Paxos declined to comment beyond the email.
The New York Department of Financial Services (NYDFS) said in a consumer alert on February 13 that it had ordered Paxos to stop minting Binance USD, the third biggest stablecoin with about $16 billion (nearly Rs. 1,32,570 crore) in circulation.
In turn, Paxos said it would stop issuing new Binance USD from February 21, but would continue to support and redeem the tokens until at least February 2024.
Cascarilla said the company’s decision to end its relationship with Binance was separate from the NYDFS directive and the communication it has had with the SEC over Binance USD.
“The market has evolved and the Binance relationship no longer aligns with our current strategic priorities,” he said.
Binance did not immediately respond to a request for comment, but has said it would continue to support Binance USD for the foreseeable future.
Cascarilla said that Paxos was still working with the SEC towards the publication of its application to obtain a clearing agency license, and with the US Office of the Comptroller of the Currency (OCC) to get final approval for its national trust bank charter.
The OCC declined to comment.
Stablecoins, digital tokens typically backed by traditional assets designed to hold a steady value, have emerged as one of the key cogs in the crypto economy. They are used for trading between volatile tokens like bitcoin and, in some emerging economies, as a means to protect savings against inflation.
© Thomson Reuters 2023
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