SEC drops its investigation into BUSD stablecoin following probe into Paxos

The U.S. Securities and Exchange Commission has said it does not plan to recommend an enforcement action against Paxos following a probe into stablecoin Binance USD BUSD +0.57% .

Paxos said it received a "formal termination notice" on July 9, which said the SEC would not recommend enforcement against the firm in the investigation of BUSD. Fortune first reported the news.

“We believe this development will unlock a new wave of stablecoin adoption by leading global enterprises," Paxos said in a statement on Thursday. "Well-designed stablecoins with strong consumer protections - like those issued by Paxos - will transform the financial system in payments, settlement and remittance use cases."

The SEC issued a notice to crypto infrastructure provider Paxos last year over its involvement in Binance USD stablecoin. Later, the SEC sued Binance and in its complaint said that BUSD was a security.

An SEC spokesperson said the agency does not comment on "the existence or nonexistence of a possible investigation."

Now, the SEC's move to drop its investigation into BUSD leaves questions about whether the agency views stablecoins as securities. This comes as lawmakers in the U.S. are working to craft legislation to regulate stablecoins. Reps. Maxine Waters, D-Calif., and Patrick McHenry, R-N.C., have been working on a bill, though one challenge has been who should be the primary regulator for stablecoin issuers. Work is also underway on the Senate side to regulate stablecoins.

SEC Chair Gary Gensler previously compared stablecoins to money market funds and other securities, adding, "Depending on their attributes, such as whether these instruments pay interest, directly or indirectly, through affiliates or otherwise; what mechanisms are used to maintain value; or how the tokens are offered, sold, and used within the crypto ecosystem, they may be shares of a money market fund or another kind of security."