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Paxos Challenges SEC’s “Wells Notice” Claiming BUSD as Security

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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 …

Paxos Challenges SECs Wells Notice Claiming BUSD as Security

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 made it clear that the company will not sit idly by and let the Securities and Exchange Commission (SEC) label BUSD as a security. In response to the SEC’s “Wells Notice”, which alerted Paxos that the regulator had preliminarily concluded that BUSD was indeed a security, Cascarilla raised objections and cited the Howey test and the Reves test to support the company’s stance. According to these tests, BUSD did not meet the legal definition of a security as it was backed by cash and equivalents, such as US dollars and US bonds, and did not carry the investment risk typically associated with securities.

Cascarilla also pointed out that Paxos had already redeemed over $2.8 billion in BUSD without disrupting the cryptocurrency market. He hinted that Paxos would challenge the SEC in court, stating that the company would “defend its litigation status” and “actively file a lawsuit against the SEC when necessary”. This aggressive stance shows Paxos’ determination to protect BUSD as a non-security asset, and sets the stage for a legal showdown with the regulator.

Moreover, Paxos is applying for a banking license from the United States Office of the Comptroller of the Currency (OCC), which could further strengthen its arguments as a legitimate financial institution. By having a banking license, Paxos could prove that its stablecoin is different from other cryptocurrencies that are not backed by physical assets, and therefore, should not be treated as a security.

In conclusion, Paxos is challenging the SEC’s assertion that BUSD is a security, and is preparing to take legal action if necessary. Cascarilla’s use of the Howey and Reves tests to defend BUSD highlights the legal complexity of regulating cryptocurrencies. The company’s application for a banking license further demonstrates its commitment to legitimizing its stablecoin and gaining regulatory approval. It remains to be seen how this legal dispute will unfold, but it could have far-reaching implications for the broader cryptocurrency market.

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