The United States Securities and Exchange Commission (SEC) has reportedly told stablecoin issuer Paxos Trust Co. that it’s planning to sue the firm over violation of investor protection laws over Binance USD. 

Paxos is the owner and issuer of BUSD — a U.S. Dollar-collateralized stablecoin — which has been around since the firm struck a partnership with Binance in September 2019. It is the third largest stablecoin, with a market cap currently exceeding $16 billion.

According to a Feb. 12 report in The Wall Street Journal citing people familiar with the matter, the SEC issued a Wells notice to Paxos — a letter the regulator uses to tell companies of impending enforcement action.

The notice alleges that Binance USD is an unregistered security, according to the people. 

It’s unclear if the notice relates to Paxos’ issuance or listing of BUSD.

Reports emerged last week that Paxos was being investigated by the New York Department of Financial Services (NYDFS), however, the exact motive behind the probe is currently unclear.

Paxos is also the creator of the Paxos Dollar (USDP) which was launched in 2018 and is behind digital asset exchange itBit, which it launched in 2012 alongside the founding of Paxos.

Cointelegraph contacted Paxos and Binance for comment but did not receive an immediate response.

This is a developing story, and further information will be added as it becomes available.