Paxos CEO Objects SEC’s Wells Notice on BUSD being Security and Seeks Banking License
It is reported that Charles Cascarilla, CEO of Paxos, raised an objection to the unilateral \”Wells Notice\” issued by the Securities and Exchange Commission of …
It is reported that Charles Cascarilla, CEO of Paxos, raised an objection to the unilateral “Wells Notice” issued by the Securities and Exchange Commission of the United States, which said that BUSD was a kind of security, and pointed out that according to the Howey test and the Reves test, BUSD did not meet the security standards, because the stable currency was always supported by cash and equivalents (such as US dollars and US bonds), He also said that Paxos had so far contributed more than US $2.8 billion in BUSD redemptions and did not disrupt the encryption market. In the future, it may “defend its litigation status” and will “actively file a lawsuit against the Securities and Exchange Commission when necessary”. In addition, Charles Cascarilla revealed that Paxos was applying to the United States Office of the Comptroller of the Currency (OCC) to obtain a banking license. （CryptoSlate）
Paxos CEO: applying for bank license to OCC, which has led to the redemption of more than US $2.8 billion BUSD and has not disturbed the encryption market
Interpretation of the news:
The CEO of Paxos, Charles Cascarilla, has raised an objection to the Securities and Exchange Commission’s (SEC) unilateral “Wells Notice” regarding BUSD being a security. According to the Howey test and the Reves test, Cascarilla pointed out that BUSD did not meet the security standards because the stable currency was always backed by cash and equivalents such as US dollars and bonds. He also noted that Paxos had contributed more than $2.8 billion in BUSD redemptions and that the stablecoin did not disrupt the cryptocurrency market.
The Howey test is a legal standard employed by the SEC to determine whether an asset can be classified as a security, based on its value derived from its ability to generate a profit. The Reves test defines what constitutes an “investment contract” under securities law. In both tests, an asset that fails to meet the standards is not considered a security.
Moreover, Cascarilla expressed his intention to defend Paxos’ litigation status in the future and “actively file a lawsuit against the Securities and Exchange Commission when necessary.” Cascarilla’s objection comes after the SEC sent a notice to Paxos in June that it was considering legal action against BUSD’s issuance and sale. The SEC alleges that BUSD’s status as a stablecoin, whose value is pegged to other assets, makes it a security that was sold to US investors without complying with regulatory requirements.
BUSD is a stablecoin developed by the Paxos Trust Company, pegged to the U.S. dollar, and built on the Ethereum blockchain. Unlike other stablecoins that may hold a basket of various assets, BUSD maintains transparency by holding only U.S. cash and equivalents, backed by a 1:1 ratio.
Furthermore, Cascarilla announced that Paxos is applying to the United States Office of the Comptroller of the Currency (OCC) to obtain a banking license. The OCC allows fintech companies to become licensed banks, with similar operating rights as traditional banks. With the license, Paxos can enhance and expand its financial services, which include regulated stablecoin issuance and trading, cryptocurrency custody, and securities settlement.
In conclusion, Cascarilla’s objection highlights the contentious issue of stablecoins and their classification as securities. As Paxos seeks to defend its position and get a banking license for expansion, this could have implications for the regulation of stablecoins, the cryptocurrency market, and financial services.
Overall, the three keywords that summarize this message are Paxos, BUSD, and security.
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