The US SEC Has Dropped Investigations Into Paxos’ BUSD and Hiro’s Stacks

The U.S. Securities and Exchange Commission (SEC) has ended investigations into two cryptocurrency projects without initiating lawsuits.

One investigation concerned stablecoin issuer Paxos’ role in the Binance USD stablecoin (BUSD). The SEC told Paxos on July 9 that its investigation had concluded and that it does not intend to recommend an enforcement action.

In response, Paxos said it is “proud of [its] relentless advocacy” and praised the SEC’s decision not to bring an enforcement action against the firm.

Paxos continued to maintain that its USD-backed stablecoins are not securities and called the SEC’s earlier Wells notice “unwarranted and unjustified.”

Paxos received the Wells notice, which stated that the SEC was considering recommending an enforcement action alleging that BUSD is a security and said the firm should have registered accordingly, in February 2023.

Upon receiving the notice, Paxos expressed disagreement with the allegations but stopped minting the BUSD stablecoin. Crypto exchange Binance, meanwhile, has largely ended support for BUSD. The token remains in circulation.

Stacks Investigation Ends

Another SEC investigation concerned Stacks, a layer 2 network for Bitcoin, and its development company, Hiro Systems, formerly Blockstack.

Stacks co-creator Muneeb Ali confirmed the end of the investigation on X, noting that the process had concluded after three years. He said that Hiro Systems provided all information that the SEC requested and worked to explain both the operation of Stacks and the company’s role in its development.

Ali said the firm is “pleased” that the SEC dropped the investigation and called it “the best outcome a company in our industry could ask for.”

However, he also called for the US to create a regulatory system that supports developers and said the firm will continue working with policymakers.

A separate filing indicates that the SEC informed Hiro Systems of the end of investigation on July 9 and does not intend to begin an enforcement action

Broader SEC Activities

Though the SEC has declined to launch legal cases against both firms, it currently has numerous high-profile cases underway, including cases against the major crypto exchanges Coinbase, Binance, and Kraken.

The SEC also closed part of an investigation into Ethereum ecosystem company Consensys while leaving open the possibility of a lawsuit against the company for its its MetaMask crypto wallet. Consensys is seeking a preemptive court ruling.

Numerous other SEC cases have concluded. The SEC website lists nearly 150 crypto-related legal actions. Those cases have largely taken place since 2018.