Paxos has published a letter from CEO Charles Cascarilla. February 21st In it, executives discussed the company’s ill-fated BUSD stablecoin.
On February 13, Paxos stopped issuing the Binance USD (BUSD) stablecoin due to the actions of New York regulators. Paxos did, but the US Securities and Exchange Commission Issued separately A Wells Notice affirming that BUSD is a security.
The company disputes the latter claim. Cascarilla writes today:
“under [the Howey and Reves tests], BUSD does not meet the security criteria. Our stablecoins are always backed by cash equivalents, i.e. dollars and US Treasury bills, but are not securities. “
While the Howey test defines many investment contracts as securities, the Reves test uses a “family similarity” test to determine whether an asset is a security. As such, Paxos aims to disprove that BUSD is a security in the broadest sense.
Cascarilla said Paxos has engaged in “constructive discussions” with the U.S. Securities and Exchange Commission (SEC) on the matter, and these discussions are being held privately. He said the company will share more information if possible.
He also said Paxos ‘may defend’ [its] This echoes earlier statements that the company would “aggressively pursue litigation if necessary.” If Paxos defends himself in court, he will be one of the few high-profile crypto projects to challenge the SEC, including Ripple, LBRY, Telegram, and Kin.
Cascarilla added that Paxos facilitated more than $2.8 billion in Binance USD redemptions without disrupting the cryptocurrency market. These redemptions continue from his $300 million redemption, which Crypto Slate reported on February 14th.
Cascarilla also noted that Paxos is working with regulators on other issues. The company is in the process of applying to the Office of the Comptroller of the Currency (OCC) to obtain a bank charter and to the SEC to act as a clearing house.
Today’s letter from Paxos is the public version of the letter the company sent to its internal employees on Saturday. Various news publications have quoted portions of this letter today.