Very interesting, do you have any sources on this being the reason for SEC's actions?

As far as I understand this, this is "just" wrapping/bridging – "just" in quotation marks because that often does carry counterparty risk if not done in a trustless way.

Is the issue that Binance is acting as a secondary custodian (holding Ethereum BUSD, issuing BSC BUSD) for a Paxos-issued (holding USD, issuing Ethereum BUSD) asset, and that that activity is not regulated by the NYDFS?