On Saturday, February 18, Paxos CEO & Co-Founder Charles Cascarilla shared the following message with the Paxos team.
Hi Team –
This has been a busy week for everyone at Paxos. I first want to express my deep gratitude to all of you for your hard work, ownership and your shared commitment to the Paxos mission. I also want to share – and reiterate – a few thoughts to close out a very eventful week.
Our Commitment to Regulation and Compliance Will Not Change
Since our founding, working with regulators and seeking oversight has defined and differentiated Paxos from our peers. I know recent news may feel deflating knowing all of the effort and resources we have dedicated to compliance and regulation over the past decade. However, our conviction that thoughtful regulation will unlock positive societal wide outcomes is unwavering. We will continue to invest in setting the standard as a regulated blockchain infrastructure provider.
Here are a few reminders on how we continue to engage with regulators: After the successful completion of our two year securities settlement pilot project, we are working with the SEC towards the publication of our Clearing Agency application. We are working with the OCC to move our conditional approval into an operationalized and launched National Trust. We are also working to expand our Singapore products in consultation with the MAS following our Payment Service Provider approval last year. We continue to pursue each of these plus any other opportunities for productive collaboration with regulators.
We Believe Unequivocally that BUSD is Not a Security
The prevailing precedents used to identify securities in the US are known as the Howey Test and the Reves Test. Under both tests, BUSD does not meet the criteria to be a security. Our stablecoins are always backed by cash and equivalents–dollars and US Treasury bills, but never securities. We are engaged in constructive discussions with the SEC, and we look forward to continuing that dialogue in private. Of course, if necessary, we will defend our position in litigation. We will share more information when we can.
Ending the Binance Relationship
When we launched BUSD in 2019 it was a very different market. Binance was a smaller company, the global stablecoin market cap was just $5bn, Paxos was far from the infrastructure leader we are today and few firms outside of crypto companies were ready to use stablecoins. The market has evolved and the Binance relationship no longer aligns with our current strategic priorities. We announced on Monday that we’re ending the relationship with Binance. Paxos’ decision was separate from the Wells Notice and the DFS directive. We believe this decision best positions Paxos to achieve our mission.
Smooth and Orderly BUSD Redemptions
Since announcing our plan to halt minting on Monday, we have facilitated more than $2.8B in BUSD redemptions with no significant market disruptions. This is a significant accomplishment and I cannot express how much I appreciate everyone’s hard work in maintaining an orderly market. We remain fully focused on serving the end holders of BUSD and protecting them from undo harm. Paxos will continue to support BUSD through at least February 2024 and maintain the highest standards of security and soundness in the stablecoin market.
Creating a More Accessible Financial System
Our goal is to create an open financial system where anyone can get any asset at any time in a trustworthy way. This is a multi-decade journey. Paxos is in a great financial position and no team is better equipped for this journey. Some of the largest companies in the world already rely on the Paxos platform to bring trusted blockchain products to hundreds of millions of end users. Partners like PayPal, Mastercard, Interactive Brokers, Mercado Libre, Nubank and Bank of America choose Paxos to power their various offerings. As a result, our success is not tied to the success of any single product, but rather to our ability to build a multi-asset infrastructure platform. These respected enterprise customers come to Paxos because of the strength of our team, the quality of our platform and the integrity with which we endeavor to work cooperatively with customers and regulators. Though our reputation seems challenged by the rumors and headlines, I know we will emerge even stronger than before. I have never been more confident in the Paxos platform and, most importantly, our team.
We will continue to use part of our weekly Team Meeting to share updates and answer questions. There will also be a second weekly All-Hands which we will hold in the afternoon so our west coast employees can participate live. As always, we will be as transparent as possible but some matters will remain private given legal constraints.
Thank you all and have a great weekend.