• On February 21, Paxos halted the issuance of new BUSD tokens after it was given a Wells Notice by the SEC.
• The SEC issued a Wells Notice to Paxos indicating that they were under investigation for unregistered BUSD tokens.
• The Wells Notice provides respondents with an opportunity to submit a written statement before any legal action is taken.
What is a Wells Notice?
In 1972, the Securities and Exchange Commission (SEC) established a committee (led by John Wells) to review and assess the Commission’s enforcement policies and practices. This resulted in the creation of the Wells Notice, which allows prospective defendants to address the decision maker before any legal action is taken. It outlines the substance of charges that may be brought against them.
Paxos Receives Wells Notice from SEC
On February 21, 2021, Paxos halted the issuance of new BUSD tokens after receiving a Wells Notice from the SEC alleging that their stablecoin was an unregistered security. Upon receipt of this notice, Paxos released a statement disagreeing with the decision, stating there are „unequivocally no other allegations against Paxos“. They also clarified that this notice has no impact on their other stablecoin USDP-USD.
Implications for Crypto Industry
The issuance of this Wells Notice comes as yet another reminder that regulators are taking closer scrutiny of cryptocurrency projects and exchanges looking to offer tokenized services or securities without proper authorization or registration. As such, many crypto projects and exchanges must take caution when launching new products in order to ensure compliance with relevant laws and regulations.
Key Takeaways
• The SEC issued a Wells Notice to Paxos indicating that they were under investigation for unregistered BUSD tokens.
• The Well’s notice provides respondents with an opportunity to submit a written statement before any legal action is taken.
• This serves as yet another reminder for crypto projects and exchanges to take caution when launching new products in order to ensure compliance with relevant laws and regulations
Conclusion
The recent issuance of a Well’s notice by the SEC indicates their increasing scrutiny over cryptocurrency-related activities requiring proper authorization or registration. All crypto projects should exercise caution when launching new products in order to remain compliant with relevant laws and regulations moving forward