Paxos announced that the U.S. Securities and Exchange Commission has ended its investigation into the BUSD stablecoin without recommending an enforcement action, according to a statement from the company. The decision marks a notable shift in the regulatory landscape for stablecoin issuers operating in the United States, who have faced heightened scrutiny since the collapse of TerraUSD in 2022.
The probe, which began in February 2023 when the SEC issued a Wells notice to Paxos regarding BUSD, focused on whether the token qualified as an unregistered security. The closure signals that the agency may be recalibrating its approach to stablecoins, which are dollar-pegged digital assets used extensively in crypto trading and decentralized finance.
On the regulatory front, the decision arrives amid broader legislative efforts in Congress to establish a federal framework for stablecoins. The bipartisan Lummis-Gillibrand Responsible Financial Innovation Act and the Stablecoin Innovation Act both aim to clarify jurisdictional lines between the SEC and Commodity Futures Trading Commission regarding digital assets.
The market response was muted, with BUSD's market cap remaining below $70 million, a dramatic drop from its peak of over $23 billion in November 2022. The stablecoin's decline accelerated after Paxos halted minting new BUSD tokens and following the SEC's initial enforcement threat against the firm.
Some industry observers caution that the case closure may not indicate a broader policy shift. Paxos still faces separate investigations and the SEC has not issued formal guidance for stablecoin issuers, leaving the sector in legal limbo regarding compliance requirements for future products.