Stablecoin issuer Paxos Trust has been told by the U.S. Securities and Exchange Commision (SEC) the regulator is planning to sue it for violating investor protection laws in a letter known as a Wells notice, which it uses to inform entities of possible enforcement action.

Fintech giant PayPal has paused the development of its stablecoin after its cryptocurrency partner, Paxos, was reported to be under investigation by the New York Department of Financial Services.

The International Monetary Fund (IMF) has said that the risks of El Salvador’s Bitcoin adoption “have not materialized” over the country’s “limited” use.

 Top stories in the Crypto Roundup today:

• Paxos Faces SEC Lawsuit Over Binance USD: WSJ
• PayPal Pauses Stablecoin Project Amid Paxos Probe
• IMF Says El Salvador’s Bitcoin Risks Did Not Materialize
• Derivatives Trading Market Share by CEX

Paxos Faces SEC Lawsuit Over Binance USD: WSJ

Stablecoin issuer Paxos Trust has been told by the U.S. Securities and Exchange Commision (SEC) the regulator is planning to sue it for violating investor protection laws in a letter known as a Wells notice, which it uses to inform entities of possible enforcement action.

The notice, according to the Wall Street Journal, alleges Binance USD (BUSD) is an unregistered security. BUSD is a Binance-branded stablecoin issued by Paxos and listed on several exchanges, including Paxos’ itBit platform.

After receiving a Wells notice, companies have a chance to write back to the SEC and explain why they should not move forward with a lawsuit. Receiving these notices does not automatically mean that the SEC will take enforcement action.

A final decision to proceed with a settlement or litigation lies with the five commissioners of the agency, who must vote to approve it.

The New York Department of Financial Services (NYDFS) has launched an investigation into the company and ordered Paxos to stop the issuance of BUSD. Paxos will continue to manage redemptions for the stablecoin.

PayPal Pauses Stablecoin Project Amid Paxos Probe

Fintech giant PayPal has paused the development of its stablecoin after its cryptocurrency partner, Paxos, was reported to be under investigation by the New York Department of Financial Services.

Paxos has recently denied claims that another regulator asked it to withdraw its application for a banking charter.

PayPal has earlier this month revealed that, as of December 31, 2022, it held a total of $604 million in various cryptocurrencies on behalf of its customers, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.

PayPal noted that its cryptocurrency holdings accounted for 67% of its total financial liabilities, which amount to $902 million at the end of the year.

IMF Says El Salvador’s Bitcoin Risks Did Not Materialize

The International Monetary Fund (IMF) has said that the risks of El Salvador’s Bitcoin adoption “have not materialized” over the country’s “limited” use.

In a statement made after an annual visit to El Salvador from the United Nations’ financial agency, the IMF said:

"Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to bitcoin.”

 El Salvador made BTC legal tender in September 2021 and its president, Nayib Bukele, has been a vocal BTC proponent on social media. The exact amount of BTC El Salvador holds isn’t clear, nor is it its cost basis.

Derivatives Trading Market Share by CEX

In January, various exchanges experienced growth in USD volume, resulting in an overall increase of 70.3% to $2.90tn for spot and derivative volume.

Bybit saw a surge of 115% in volume, reaching $301bn, making it the second largest derivative exchange with 14.6% of the market share, trailing behind only Binance.

Dive deeper into the latest market trends with CryptoCompare’s latest Exchange Review report.

State of the Crypto by Top Tier Exchange Volume

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