Feb 10, 2023

NYDFS Investigates Paxos Over Stablecoin Issuance

The New York Department of Financial Services (NYDFS) is reportedly investigating Paxos Trust Company, the issuer of the popular Binance USD (BUSD) and Paxos Dollar (USDP) stablecoins.

The investigation is said to have been initiated by the NYDFS, though the exact reasons for the probe remain unclear. A spokesperson for the NYDFS declined to comment on the ongoing investigation, but noted that the department is actively working to protect consumers from the risks associated with investing in the cryptocurrency market.

Paxos is a New York-based financial services firm that has been in operation since 2012. It is the issuer of the third-largest stablecoin, BUSD, which has a market cap of over $16 billion. Paxos is also the creator of the sixth-largest stablecoin, Paxos Dollar (USDP), with a market cap of around $875 billion. Additionally, Paxos is the founder of PAX Gold (PAXG), a gold-backed Ethereum token.

The NYDFS granted Paxos a “BitLicense” in 2015, which legally allows companies to conduct digital currency-related activities in the state of New York. In April 2021, the firm received a preliminary approval from the U.S. Office of the Comptroller of the Currency (OCC) for a full banking charter. However, Paxos recently denied rumors that the OCC may order them to withdraw their application.

In response to the recent market volatility, the NYDFS released a stablecoin guidance report in May 2022 to ensure that stablecoin issuers fully back their assets and attest regularly. This report was released after the Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed.

Cointelegraph reached out to Paxos and Binance for comment on the investigation, but did not receive an immediate response.

The news of the investigation comes as the NFT market continues to boom, and as more and more companies are utilizing NFTs to promote their products and services. NFTs are becoming increasingly popular as a way to engage with customers and increase brand visibility. As a result, many companies are turning to NFT marketing agencies to help them create and promote their NFTs. These agencies specialize in creating NFT campaigns and strategies that are tailored to each company’s needs, and can help to increase the visibility of their NFTs on platforms such as Twitter.

In addition to helping companies create and promote their NFTs, these agencies can also provide advice on how to best monetize their NFTs. This includes helping companies set up their NFTs for sale on platforms such as OpenSea and Rarible, as well as providing guidance on how to best market their NFTs to potential buyers.

The investigation into Paxos is a reminder that regulatory oversight is still a major factor in the crypto and web3 space, and that companies should remain aware of the legal requirements and best practices when engaging in digital asset activities.

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