Paxos CEO Objects to SEC’s “Wells Notice” on BUSD, Plans to Defend Against Securities Classification

02/22/2023 05:37 • Tech Trends • 87 views

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

Analysis based on this information:

The CEO of Paxos, Charles Cascarilla, has taken issue with the SEC’s recent announcement that BUSD qualifies as a security. The SEC’s determination is based on the belief that BUSD meets the criteria for being a security according to both the Howey test and the Reves test. However, Cascarilla argues that BUSD is not a security, as it is always supported by cash and equivalents like US dollars and bonds.

Despite the SEC’s decision, Cascarilla believes that BUSD has not disrupted the crypto market and has so far contributed over $2.8 billion in BUSD redemptions. He plans to defend Paxos’ position against the SEC and file a lawsuit if necessary. He is also seeking a banking license from the OCC.

The Howey test is a legal test used to determine whether a contract constitutes an investment contract, and therefore a security. The Reves test sets out particular criteria for determining whether a note is a security. Both tests focus on issues such as the intention of the parties involved and the scope of the investment involved.

Cascarilla’s objections to the SEC’s decision regarding BUSD suggest that he believes that the SEC’s determination may be overly broad, as the security criteria can be quite strict. He is also indicating that obtaining a banking license may be the best way to avoid being subject to securities regulations.

This news may have an impact on the broader crypto market as stablecoins like BUSD are often used for trading and for access to tokenized assets. The determination of whether BUSD is a security may have implications for other stablecoins and their usage as well.

In conclusion, this news is a reminder of the complexities and uncertainties surrounding the classification of digital assets. As crypto continues to grow and become more mainstream, regulators like the SEC will continue to evaluate whether digital assets meet the criteria for being securities. BUSD’s classification is one such evaluation, and it remains to be seen how this case plays out for Paxos and the broader crypto market.

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