- 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- However, Paxos has denied rumors of its application for a full banking charter being withdrawn by regulators.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.
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.
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:
To clarify speculation: Paxos has not been asked to withdraw its application for a national trust bank charter from the OCC, nor has it been denied the charter. Paxos continues to work constructively with the OCC.— Paxos (@PaxosGlobal) February 8, 2023
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.
Read about Paxos’ latest license in:
Stablecoin Issuer Paxos Obtains Institutional License In Singapore As The First US-Based Blockchain Company
The concerns about the direction of regulation in the U.S. is covered in:
Coinbase CEO Brian Armstrong Says SEC’s Ban on Crypto Staking “Would Be a Terrible Path for the U.S.”