Tuesday, September 16, 2025

SEC Has Crypto Community on Edge Over Potential Wells Notices

The SEC is sending out Wells Notices to a number of US-based stablecoin firms, ordering them to stop selling supposedly unregistered securities to investors. When an entity receives a Wells Notice, they receive notification from regulators to inform them of completed investigations where infractions have been discovered.

In what appears to be a first for the SEC, regulators have already taken enforcement action against Paxos Trust Co., accusing the crypto company of violating investor protection laws over its issuance of Binance USD (BUSD), which regulators consider to be an unregistered security.

Paxos responded by saying, “Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities laws. This SEC Wells notice pertains only to BUSD. To be clear, there are unequivocally no other allegations against Paxos. Paxos has always prioritized the safety of its customers’ assets. BUSD issued by Paxos is always backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts. We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary.”

The move comes in light of a series of sweeping changes the SEC is preparing to propose as early as Wednesday, aimed at preventing risks from the widely unregulated crypto markets from spilling into the broader traditional financial system. As reported by Bloomberg, regulators are planning to make it more difficult for crypto firms to become “qualified custodians” for hedge funds, pension funds, and private equity companies.

Hoopla Over Social Media Claims Circle Received a Wells Notice

Some sources are saying the SEC’s crackdown is just the beginning.

Which doesn’t seem like a stretch given recent actions by the SEC itself. According to unverified claims circulating on Twitter, stemming from Eleanor Terrett from Fox Business, stablecoin company Circle had also supposedly received a Wells notice, requesting the company cease and desist selling unregistered securities.

However, that claim was later disputed by Circle’s chief strategy officer Dante Disparte.

The author then backtracked with a correction.

If the SEC were to continue to take aim at firms like Paxos, it could mean institutional investors would have to transfer their holdings to qualified custodians. Moreover, institutional fund managers could also be subject to random audits to verify their custodial relationships.

Information for this briefing was found via Bloomberg, Twitter, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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