New York Regulators Launch Investigation into Stablecoin Issuer Paxos

New York regulators are investigating Paxos, but the stablecoin issuer has debunked claims of its license being withdrawn.

Charles Cascarilla being questioned by New York police
  • Paxos is reportedly being investigated by the New York Department of Financial Services, but there are limited details on the reason.
  • However, Paxos has denied rumors of its application for a full banking charter being withdrawn by regulators.
  • Despite regulatory uncertainties, the investigation comes amidst heightened scrutiny of crypto firms in the United States.

Stablecoin issuer, Paxos is being investigated by the New York Department of Financial Services (NYDFS) but has denied that the company has been asked to withdraw its application for a full banking charter.

New York Regulators Investigate Paxos

Paxos, the issuer of the Binance USD (BUSD) and the Pax Dollar (USDP) stablecoins is reportedly being investigated by the New York Department of Financial Services (NYDFS) as security of the industry piques.

Although the reason for the investigation hasn’t been revealed yet, Paxos Trust Co. has its headquarters in New York and, as such, is regulated by the New York State Financial Regulator.

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Paxos received a “BitLicense” approval from the NYDFS in 2015, which legally permits the stablecoin issuer to conduct digital currency-related activities in New York. Spokespersons of the agency have declined to comment on the ongoing investigation.

Paxos Denies Investigations Are Linked to Banking Requests

In April 2021, Paxos received a provisional bank charter from the U.S. Office of the Comptroller of the Currency. Since then, the company has been trying to secure a national trust bank charter.

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Following the reports, there have been rumors that the investigations could lead to Paxos being asked to withdraw its application for a full banking charter. However, the stablecoin issuer has dismissed those claims, clarifying:

Although Paxos has refused to comment on the investigation because it is still ongoing, a company spokesperson noted that “the department (NYDFS) is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers.”

What Is the Fate of Crypto in the U.S.?

The report comes in the heat of Kraken’s settlement for offering unregistered securities and amidst rumors of the United States moving to quietly ban cryptos and banks from engaging with digital assets.

In the face of regulatory uncertainty in the United States, the crypto community calls for regulators, especially the Securities and Exchange Commission (SEC), to collaborate with industry leaders rather than focus solely on enforcement.

On the Flipside

  • There are concerns that the approach taken by the United States in regulating crypto could stifle the growth of the industry in the country, leading to firms moving outside the country.

Why You Should Care

Since the TerraUSD collapse, stablecoin issuers must be in full compliance with the NYSDFS’ stablecoin-related guidance. An investigation does not always mean a company has breached any laws or regulations.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Milko Trajcevski

Milko Trajcevski is a DailyCoin news reporter, mainly focused on Ethereum (ETH), Cardano (ADA), and their founders (Vitalik Buterin and Charles Hoskinson). Milko is an avid follower of crypto and blockchain technology and has written thousands of articles on the subjects. He finds joy in transforming complex issues into written content that anyone can understand. Milko has used and analyzed numerous exchanges, such as Coinbase, FTX, and Binance. He also closely follows all of the latest news around the largest decentralized exchanges (DEXs). Location: Skopje, Macedonia