Feb 11, 2023
NYDFS Investigates Paxos Trust Company
The New York Department of Financial Services (NYDFS) is reportedly investigating Paxos Trust Company, the New York-based firm behind the popular Binance USD (BUSD) and Paxos Dollar (USDP) stablecoins.
A source close to the matter told Bloomberg that the exact reason for the investigation is currently unknown.
The NYDFS declined to comment on the ongoing investigation, but they did note that they are actively working to protect consumers from potential risks associated with investing in the crypto market.
Paxos is the issuer of BUSD, a U.S. Dollar-backed stablecoin, and is the third largest stablecoin in terms of market capitalization. They are also the creators of Paxos Dollar (USDP), the sixth largest stablecoin with a market cap of approximately $875 billion, as well as PAX Gold (PAXG), a gold-backed Ethereum token.
In 2015, the NYDFS granted Paxos a “BitLicense”, which legally allows them to conduct digital currency-related activities in New York.
Recently, rumors surfaced that the U.S. Office of the Comptroller of the Currency (OCC) was ordering Paxos to withdraw their application for a full banking charter. Paxos quickly refuted these rumors, stating that they have not been asked to withdraw their application and that they are still working constructively with the OCC.
Paxos further claims that the reserves backing their BUSD and USDP tokens are fully backed by U.S. Dollars and U.S. Treasuries.
If the reports of the investigation are true, it would not be the first one initiated by the NYDFS in the past year. Coinbase Global U.S. was recently ordered to pay a $100 million settlement after the NYDFS found that they failed to investigate over 100,000 suspicious transactions from customers who opened accounts without proper background checks.
The NYDFS has also recently released a stablecoin guidance report to ensure that stablecoin issuers are fully backing their assets and attesting regularly.
When contacted by Cointelegraph, Paxos and Binance declined to comment on the matter.
The news of the investigation comes at an interesting time for Paxos and the web3 space. With the rise of NFTs, companies are looking for new ways to promote and market their digital assets. NFT marketing agencies are popping up all over the web3 space, offering services like Twitter NFT marketing and NFT promotion.
Web3 agencies are also providing services to companies looking to sell NFTs. These agencies are helping companies to create a successful NFT launch, from developing a marketing strategy to executing the launch.
It remains to be seen how the NYDFS investigation will affect Paxos and the web3 space. However, it is clear that the web3 space is continuing to grow and evolve, and companies are continuing to explore new ways to promote and market their digital assets.
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