SEC lawsuit against Paxos over BUSD baffles crypto community

Paxos and Binance USD (BUSD) being in the sights of United States regulators sparked various reactions from the crypto community. 

On Feb. 13, the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos, alleging that BUSD is unregistered security. On the same day, the New York Department of Financial Services (NYDFS) also ordered Paxos to halt the issuance of BUSD.

As Paxos faces regulatory scrutiny on several fronts, various members of the crypto community went to Twitter to give their takes on the situation. From disregarding the issue as “FUD” to calling it an attack against the Binance exchange, crypto community members laid down various theories on the allegations that BUSD is an unregistered security.

Crypto analyst Miles Deutscher expressed his thoughts in a tweet, arguing that nobody expects profit when purchasing a stablecoin. He tweeted:

The SEC has labelled BUSD as an “unregistered security”, and is suing its issuer, Paxos. But how on earth is a STABLECOIN considered a security, when it clearly doesn’t meet the Howey Test criteria. No one has ever had “the expectation of profit” when buying $BUSD. pic.twitter.com/QXOlDUyvc3

Similarly, the pseudonymous trader Tree of Alpha was also baffled by the new development. The community member questioned how it was considered a security and asked their followers if they were buying BUSD with the expectation that it will go to $2. In addition, the trader also called out the SEC chairperson Gary Gensler and said that the government official is on an “unhinged, unchecked crusade against crypto.” 

Meanwhile, iTrader AshWSB also commented on the matter and dismissed the issue as “FUD.” The trader argued that BUSD is backed, and Paxos not issuing any more tokens will not affect the existing tokens. "It's good to stay informed but don't make emotional moves," they warned.

Don’t worry about the BUSD Fud BUSD not a scam token, it’s backed by USD 1:1 Paxos not issuing any more BUSDwill not effect the existing BUSD It’s good to stay informed but don’t make emotional moves.

Apart from the three, Bitcoin (BTC) analyst Tedtalksmacro also echoed the sentiments that BUSD might not be meeting the criteria for a security. The analyst also suggested that the event may simply be “a shot at Binance.”

Related: Kraken reaches $30M settlement with SEC over staking as IRS seeks user information

In the midst of the news, Cointelegraph spoke with several blockchain lawyers to find out if stablecoins can be securities. One lawyer pointed out that while stablecoins are created to have a fixed value, holders can profit through various means like arbitrage, hedging and staking.