The demise of several major crypto-related companies is forcing the hand of regulators looking to find ways to block crypto from mainstream financial markets, said Jesse Austin Campbell, former head of portfolio management at Paxos.

“Regulators in general failed to deal adequately with Celsius [Network]Terra and FTX, and are now going after any of the ramps they can to try to reduce access to the system,” Campbell, now an assistant professor at Columbia University’s Business School, said on CoinDesk TV’s “First Mover” Wednesday.

Paxos is one of those crypto companies facing regulatory scrutiny. Earlier this week, the stablecoin issuer received a Wells notice from the US Securities and Exchange Commission (SEC) warning of regulatory action for the company’s alleged sale of an unregistered security, in this case the Binance USD (BUSD) stablecoin. The regulator claims that the platform’s stablecoin is not backed one-to-one with the US dollar. Paxos has argued otherwise, saying it will sue if necessary.

However, Paxos stopped minting the BUSD token after being told by the New York Department of Financial Services that there are unresolved issues related to Paxos’ oversight of its relationship with the Binance exchange. Binance does not have a direct involvement in the BUSD stablecoin beyond its name, but Paxos said it is ending its relationship with the exchange. Paxos is licensed in New York.

“The NYDFS is the regulator and they are the ones who have the authority directly to tell Paxos what they are allowed to do,” Campbell said. “The SEC can make a play, claim [BUSD is] a security, but just like Ripple, it will probably end up in court. With NYDFS, there is no doubt.”

Paxos held over $16 billion in BUSD tokens before it began burning them following Monday’s announcement that it would stop minting.

Campbell, who was at Paxos between March and December 2022, said the crackdown on the company shows that “regardless of intent,” what regulators are showing the public is that “probably the biggest mistake you could have made is being an onshore, regulated company in the crypto space .”

“It is you who are constantly punished, fined and harassed, even though it is not you who have lost user money,” he said of licensed companies such as Paxos. “A lot of people offshore have done things that are significantly more reprehensible and that don’t face the same level of scrutiny.”

In a later interview with CoinDesk, Campbell said while being casual, “I think the problem is that it’s the world [federal regulators] has created, and it’s important to spot that point.” While US-licensed companies are being “smashed around,” offshore companies like Tether, the issuer of the USDT stablecoin, “just grow and grow and grow.”

As Campbell noted in an op-ed for CoinDesk, stablecoins are “very simple instruments” and are not new.

“It’s the promise of, ‘you’re going to give some money, and later they’ll give you back $1.’ It’s something that already exists,” Campbell said on CoinDesk TV. He said what is “confounding to me is the extreme kind of noise and confusion all around [stablecoins] when they actually work very similar to things we’re already familiar with.”

The demise of several major crypto-related companies is forcing the hand of regulators looking to find ways to block crypto from mainstream financial markets, said Jesse Austin Campbell, former head of portfolio management at Paxos.

“Regulators in general failed to deal adequately with Celsius [Network]Terra and FTX, and are now going after any of the ramps they can to try to reduce access to the system,” Campbell, now an assistant professor at Columbia University’s Business School, said on CoinDesk TV’s “First Mover” Wednesday.

Paxos is one of those crypto companies facing regulatory scrutiny. Earlier this week, the stablecoin issuer received a Wells notice from the US Securities and Exchange Commission (SEC) warning of regulatory action for the company’s alleged sale of an unregistered security, in this case the Binance USD (BUSD) stablecoin. The regulator claims that the platform’s stablecoin is not backed one-to-one with the US dollar. Paxos has argued otherwise, saying it will sue if necessary.

However, Paxos stopped minting the BUSD token after being told by the New York Department of Financial Services that there are unresolved issues related to Paxos’ oversight of its relationship with the Binance exchange. Binance does not have a direct involvement in the BUSD stablecoin beyond its name, but Paxos said it is ending its relationship with the exchange. Paxos is licensed in New York.

“The NYDFS is the regulator and they are the ones who have the authority directly to tell Paxos what they are allowed to do,” Campbell said. “The SEC can make a play, claim [BUSD is] a security, but just like Ripple, it will probably end up in court. With NYDFS, there is no doubt.”

Paxos held over $16 billion in BUSD tokens before it began burning them following Monday’s announcement that it would stop minting.

Campbell, who was at Paxos between March and December 2022, said the crackdown on the company shows that “regardless of intent,” what regulators are showing the public is that “probably the biggest mistake you could have made is being an onshore, regulated company in the crypto space .”

“It is you who are constantly punished, fined and harassed, even though it is not you who have lost user money,” he said of licensed companies such as Paxos. “A lot of people offshore have done things that are significantly more reprehensible and that don’t face the same level of scrutiny.”

In a later interview with CoinDesk, Campbell said while being casual, “I think the problem is that it’s the world [federal regulators] has created, and it’s important to spot that point.” While US-licensed companies are being “smashed around,” offshore companies like Tether, the issuer of the USDT stablecoin, “just grow and grow and grow.”

As Campbell noted in an op-ed for CoinDesk, stablecoins are “very simple instruments” and are not new.

“It’s the promise of, ‘you’re going to give some money, and later they’ll give you back $1.’ It’s something that already exists,” Campbell said on CoinDesk TV. He said what is “confounding to me is the extreme kind of noise and confusion all around [stablecoins] when they actually work very similar to things we’re already familiar with.”