Paxos – the blockchain infrastructure platform behind the Binance USD (BUSD) stablecoin – announced on Thursday that regulators have forfeited their investigation into the firm concerning its dollar-pegged tokens.

The result represents a major legal victory for crypto at large, where thick fog has surrounded the legal classification and regulatory treatment of stablecoins.

Paxos Prevails Over The SEC

After beginning its investigation of BUSD in February 2023, the Securities and Exchange Commission (SEC) sent a formal termination notice to Paxos on July 9 stating that it would not pursue further enforcement action.

“Paxos Trust Company has always maintained that its USD-backed stablecoins are not securities under federal securities laws and that the Wells Notice was unwarranted and unjustified,” wrote Paxos in a Thursday press release. “We believe this development will unlock a new wave of stablecoin adoption by leading global enterprises.”

Stablecoins are blockchain-based tokens that are value-pegged to relatively price-stable assets. The most common assets used for this are generally government-issued currencies – most commonly the US dollar, as was the case with BUSD.

Upon beginning its investigation early last year, the SEC forced Paxos to stop issuing more tokens, and allow for a smooth redemption process for current holders whereby it would wind down its operations.

BUSD was the third largest stablecoin at the time next to Tether (USDT) and Circle USD (USDC), and was rapidly gaining market share thanks to efforts by Binance to build liquidity around it.

Binance was later forced to drop the asset, and since early 2023, Tether’s stablecoin dominance has exploded to 69.19% of the entire market, according to DefiLlama.

Implications For The Crypto Industry

The result of the SEC’s investigation – and potential lawsuit – against Paxos and BUSD has major implications for crypto at large. Both USDT and USDC operate very similarly to how BUSD functioned, meaning a court ruling that BUSD was an unregistered security could have led Tether and Circle to a similar fate.

Rostin Benham – chairman of the Commodities and Futures Trading Commission (CFTC) – has previously testified that his agency’s analysis found USDT to be a commodity, rather than a security.

“It was clear to our enforcement team and the commission that the Tether stablecoin was a commodity and that we needed to move forward, and swiftly, to police that market,” he said at the time.

It’s also critical in other high-profile lawsuits between the SEC and major crypto exchanges. Binance, for example, is accused of issuing and trading multiple unregistered securities on its platform – one of which was allegedly BUSD.