Paxos published a letter from its CEO, Charles Cascarilla, on Feb. 21 in which the executive discussed the company’s ill-fated BUSD stablecoin.
On Feb. 13, action from New York regulators led Paxos to stop issuing its Binance USD (BUSD) stablecoin. Though Paxos did so, the U.S. Securities and Exchange Commission separately issued a Wells Notice prospectively alleging that BUSD is a security.
The company has contested the latter assertion. Cascarilla wrote today:
“Under [the Howey and Reves 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.”
While the Howey Test defines many investment contracts as a security, the Reves test uses a “family resemblance” test to determine whether an asset is a security. As such, Paxos aims to disprove that BUSD is a security in a very broad sense.
Cascarilla said that Paxos is involved in “constructive discussions” with the
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