- Stablecoin Issuer Paxos obtains in-principle approvals in Abu Dhabi.
- The digital asset platform will offer regulated cryptocurrency services to investors.
- Paxos will offer stablecoins backed by the US dollar and other diverse currencies.
As United States regulators aim for increased control over the cryptocurrency industry, mounting regulatory pressure prompts crypto firms to explore more favorable regions for international expansion. In February 2023, the Securities and Exchange Commission (SEC) initiated legal proceedings against cryptocurrency asset firm Paxos over its Binance USD stablecoin (BUSD), alleging securities laws violations.
Against this backdrop, Paxos is expanding its reach into the Middle East, having obtained the necessary financial permission to offer regulated crypto services in Abu Dhabi.
Paxos Snags Approval to Issue Stablecoins in Abu Dhabi
On Wednesday, November 29, Paxos announced that it had received two in-principle approvals (IPAs) from the Financial Services Regulatory Authority (FSRA) to conduct digital assets services in the Abu Dhabi Global Market.
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The approvals grant Paxos permission to issue stablecoins backed by the US dollar and other currencies, maintaining a 1:1 backing with USD and cash equivalents for stability and reliability.
The stablecoin issuer will provide regulated crypto-brokerage and custody services. This will enable both retail and institutional investors to benefit from Paxos’ digital asset infrastructure solutions, contributing to the promotion of mainstream adoption.
Paxos’ Head of Strategy, Walter Hessert, emphasized the significance of the approvals for the firm’s operations and expansion ambitions.
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“Our IPAs from the FSRA, on the heels of our IPA from the Monetary Authority of Singapore, solidify our commitment to pursuing international growth through regulated frameworks.”
The firm further stated that it would seek a full operational license to broaden the reach of its regulated currency-backed stablecoins while ensuring regulatory compliance, particularly in response to the regulatory actions it faced at the start of the year.
Paxos’s BUSD Regulatory Challenges
On February 13, 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop the issuance of the BUSD stablecoin shortly after the Securities and Exchange Commission (SEC) accused the blockchain company of violating investor protection laws.
In response, Paxos discontinued the minting of the stablecoin, casting a cloud of uncertainty over the firm’s operations and the sustainability of the Binance USD. The setback resulted in a drastic decrease in the overall trading volume of BUSD and subsequent delistings from multiple exchanges, including Binance.
As part of a gradual phase-out process, Binance informed users that they would need to convert their BUSD holdings into other stablecoins, such as First Digital USD (FDUSD) and TrueUSD (TUSD) stablecoin.
Binance announced its decision to cease support for the stablecoin on December 15, 2023. The exchange urged BUSD holders to withdraw their holdings or convert them into other assets before the deadline, as all remaining BUSD balances will be converted to FDUSD on December 31.
Binance assured that BUSD will maintain a 1:1 backing with USD until at least February 2024.
On the Flipside
- On November 19, Paxos obtained in-principle approval from the Monetary Authority of Singapore for a subsidiary entity set to offer USD-backed stablecoins.
- Intensifying regulatory scrutiny has spared little to no exchanges this year, as major industry players, including Binance, Coinbase, and Ripple, have come under heat.
- The approval of Paxos by financial regulators in Abu Dhabi underscores the region’s commitment to embracing the crypto industry.
Why This Matters
Paxos’ entry into Abu Dhabi and acquisition of the necessary permissions underscore its efforts to expand its services across more welcoming crypto hubs to offer regulated services.
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