Paxos Ends Binance Relationship But Vows to Fight On

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• Paxos has ended its relationship with Binance, but has vowed to fight its case over the BUSD stablecoin
• The company maintains that BUSD is not a security as the SEC had claimed
• The BUSD market cap has dropped 22% since Paxos was told to stop minting it

Paxos has ended its relationships with Binance following “constructive discussions” with the Securities and Exchange Commission (SEC). The New York-based crypto platform was last week forced to stop minting Binance’s BUSD stablecoin after the SEC sent it a Wells Notice, which suggested that a lawsuit over the minting of what it called an unregistered security was imminent. Paxos said that it will continue to redeem BUSD tokens through the end of February, but to all intents and purposes its relationship with Binance is over.

Paxos Stands by Claims That BUSD Isn’t a Stablecoin

BUSD launched in September 2019, with Paxos, a New York Department of Financial Services (NYDFS)-registered business chosen as the minting platform. Things had been going fine, with BUSD amassing a $16 billion market cap, until last week’s action by the SEC brought a halt to the relationship, with the agency informing Paxos that it considered the minting of BUSD an unregistered sale of securities.

Paxos said it had no choice but to comply, although it firmly denied the SEC’s allegations over BUSD being a security and insisted that it would fight its corner in court if it had to. This week it provided an update to employees, seen by The Block, with CEO Charles Cascarilla informing Paxos staff that it hoped that continued “constructive discussions” would bring about a resolution, but that “we will defend our position in litigation”.

Cascarilla added that the relationship with Binance “no longer aligns with our current strategic priorities”, although he claimed that this decision was independent from the action taken by the SEC and NYDFS. Paxos has fielded more than $2.8 billion in BUSD redemptions, with BUSD’s market cap dropping 22% since news of the action against Paxos broke.