SEC Investigation Into Paxos Now Ends With Softer BUSD Classification

Key Points:

• The SEC investigation into Paxos has ended with the determination that BUSD is not a security.
• The decision marks a significant shift in the SEC’s approach to regulating digital assets.
• Political factors may be influencing this change in the regulatory landscape.

The United States Securities and Exchange Commission (SEC) has decided to end its investigation into Paxos, determining that Binance USD (BUSD) does not qualify as a security.

Read more: New Paxos Singapore Executive Director Appointed to Enhance Market Expansion

SEC Investigation Into Paxos Ended: BUSD Not Classified as Security

The decision, reported by Fortune, represents a significant moment in the ongoing discourse on the regulatory status of digital assets. Jorge Tenreiro, the acting chief of the SEC’s crypto assets and cyber unit, informed Paxos on July 9 that no enforcement action would be recommended. Paxos’ head of strategy, Walter Hessert, expressed relief, noting that the decision should provide more market certainty and facilitate partnerships with companies like PayPal.

Initially, the SEC had argued that BUSD was an investment contract and therefore a security. The conclusion of the SEC investigation into Paxos means that BUSD is no longer viewed as a security by the agency. It may influence future regulatory approaches to digital assets, although it does not necessarily set a precedent, as each case is assessed individually.

SEC’s Shift in Regulatory Approach

The SEC’s shift in stance might also reflect a broader change in the regulatory landscape. In 2023, the SEC embarked on a rigorous regulation-by-enforcement campaign against the crypto sector, targeting firms like Binance and Coinbase and forcing Paxos to wind down BUSD, reducing its market cap from $23 billion to just $70 million.

However, 2024 has seen a reversal in this aggressive policy. The SEC, which had sought to classify Ethereum as a security, recently approved Ethereum ETFs, signaling a softer approach towards cryptocurrencies.

The dropped SEC investigation into Paxos could also be influenced by political factors, with Republican Presidential candidate Donald Trump showing strong support for crypto.