Paxos Trust, the latest US crypto firm to be targeted by the SEC, has stated that it “categorically disagrees” with the US regulator that the stablecoin Binance USD (BUSD) is a security.

Paxos, which issues the Binance ecosystem stablecoin, addressed the “Wells Notice” it received from the US Securities and Exchange Commission in a press statement.

And, despite abiding with an order from the New York Department of Financial Services (NYDFS) to cease minting new BUSD tokens, Paxos delivered some fighting words, emphasising it’s prepared to pursue a course of litigation against the SEC:

“Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws,” wrote the stablecoin issuer.

“This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. Paxos has always prioritized the safety of its customers’ assets. BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.

“We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.”


Further reactions to the Paxos and BUSD drama

Meanwhile, Gabriel Shapiro, the General Counsel lawyer with blockchain protocol incubation firm Delphi Labs, has noted that the SEC has gone for possibly the trickiest top stablecoin to take down – more so than non-US based USDT, and USDC, issued by the BlackRock-owned Circle company.

He does, however, believe that Paxos would be likely to lose in a legal tussle with the SEC, giving it only a “slight chance” of victory.

And here’s another interesting take, from one of the staffers at DeFi data aggregator DeFi Llama…

What “0xngmi” is suggesting here is that third-party control of a given stablecoin’s supply has been an important consideration for regulators in their actions against Paxos and BUSD thus far.


JPMorgan sees ‘deposit tokens’ replacing stablecoins

Somewhat related to today’s stablecoin hoo-ha, it’s interesting to note how JPMorgan is viewing the future of transactional, volatility-eschewing cryptocurrencies.

The major investment bank, in collaboration with consultants Oliver Wyman, released a new report detailing what it sees as a major future trend for crypto – “deposit tokens”.

Deposit tokens, the report explains, are issued on a blockchain by a depository banking institution, rather than a third party, to represent a deposit claim.

They differ from stablecoins in terms of issuance, with the latter commonly issued by a non-bank private entity – such as Circle or Tether, or Paxos, for instance.

But they also differ in terms of backing, with stablecoins requiring some form of collateral to maintain the 1:1 value pegging to a fiat currency such as USD. Deposit tokens, in theory, don’t require any collateral.

As eToro market analyst Simon Peters noted in some commentary shared with Stockhead this morning, you can think of deposit tokens as “akin to historic money issuance in which banks issued their own notes that were ultimately backed by a central bank. Remnants of that system can still be seen in Scotland where banks issue pound notes, and in Northern Ireland, too.

“JPMorgan is in effect suggesting that these stablecoins be removed from the equation with deposit tokens functioning as digital, blockchain recorded versions of banking deposits,” added Peters.