The CEO of Paxos, Charles Cascarilla, revealed the company's failed Binance USD stablecoin in a letter that was released on February 21 and began, "We Feel Unequivocally that BUSD is Not a Security."
On February 21, Paxos would stop creating new BUSD stablecoins as per instructions from the New York Department of Financial Services. As a result of "several unsolved issues relating to Paxos' monitoring of its connection with Binance," the New York regulator issued the order.
Despite Paxos' measures, the US Securities and Exchange Commission declared that BUSD is a securities in a separate Wells Notice.
In a news statement, Paxos CEO and co-founder Charles Cascarilla disputes the assertion. According to Charles Cascarilla:
"The prevailing precedents used to identify securities in the US are known as the Howey Test and the Reves Test. Under both tests, BUSD does not meet the criteria to be a security. Our stablecoins are always backed by cash and equivalents–dollars and US Treasury bills, but never securities."
The Reves Test uses a "family resemblance" criterion to determine whether an asset is a security, whereas the Howey Test deems many investment contracts to be securities. Paxos aims to prove that the US dollar is not a security in the fullest sense as a result.
Cascarilla continued by stating that Paxos has successfully handled redemptions of more over $2.8 billion in Binance USD without causing any hiccups in the cryptocurrency market. Furthermore, Paxos will uphold the highest standards of security and soundness in the stablecoin market and continue to support BUSD until at least February 2024.