According to reports, the United States Securities and Exchange Commission has informed Paxos Trust Co. that it intends to sue the crypto platform. This news comes days after Paxos was reported to be under investigation by the New York Department of Finance.

According to reports, the SEC will take legal action against the crypto firm for being a stablecoin issuance company. This is due to the violation of investor protection laws. Binance USD ($BUSD) is the stablecoin that Paxos supports. According to the Wall Street Journal the SEC sent a Wells Notice (a letter that the regulator sends companies informing them about planned enforcement actions) to Paxos. Paxos is accused of supporting an unregistered security through offering Binance USD trade and sale.

A Binance representative stated that stablecoins are not a form security but an investment, and away from fiat and other currencies.

Stablecoins provide investors with a safety net from volatile markets. Limiting their access would directly affect millions of people around the world. We will continue to monitor this situation. Global users have access to a variety of stablecoins .”

This is part of a larger crackdown on crypto-related businesses. According to Eleanor Terrett, Fox Business journalist and Fox Business reporter, more Wells notices will be sent to crypto firms for securities violations.

Another step in the unilateral effort by the @SECGov and @NYDFS to blitz cryptocurrency. There will be more Wells notices in the next 2-3 weeks, according to my sources.

@JunoFinanceHQ is worth following. https://t.co/u4Q3pHN2lH

— Eleanor Terrett (@EleanorTerrett) February 13, 2023

The SEC announced earlier in the month a $30 million settlement to crypto exchange Kraken. After Kraken failed to register its crypto staking programme, the settlement was announced. The SEC claimed that the staking program was in violation of securities law. Kraken’s actions sparked controversy within the SEC. Commissioner Hester Peirce claimed that the agency’s conduct was not fair or efficient.

Regulators are trying to keep up with the rapid growth of the crypto industry. While it remains to be seen what the SEC will do, it is clear that they are determined to make sure that crypto companies comply with investor protection laws. Stabilcoins are a vital safety net for investors in volatile market markets. Limiting their access could cause harm to millions of people around the world.