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 stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP). This investigation is the latest in a series of probes conducted by the NYDFS over the past year.

Paxos is the issuer of BUSD, a U.S. Dollar-collateralized stablecoin, which has a market cap of over $16 billion and is the third largest stablecoin. The firm is also the creator of the Paxos Dollar (USDP), the sixth largest stablecoin with a market cap of $875 billion, and the founder of PAX Gold (PAXG), a gold-backed-Ethereum token. Additionally, Paxos is the owner of digital asset exchange itBit, which was launched in 2012.

The NYDFS issued Paxos with a “BitLicense” in 2015, allowing the firm to conduct digital currency-related activities in the state of New York. Furthermore, the NYDFS recently released a stablecoin guidance report in order to ensure stablecoin issuers fully back their assets and attest regularly.

A “person familiar with the matter” told Bloomberg in a Feb. 10 report that the exact motive behind the probe is currently unclear. When asked about the investigation, an NYDFS spokesperson declined to comment on ongoing investigations but stated that the department is working to protect consumers from risks associated with investing in the cryptocurrency market.

Paxos also recently refuted rumors that the U.S. Office of the Comptroller of the Currency (OCC) may order Paxos to withdraw its application for its full banking charter, despite the firm only receiving preliminary approval in April 2021.

The news of the investigation comes at a time when the NFT (Non-Fungible Token) market, as well as the web3 space, is booming. NFTs are digital assets which are unique, non-interchangeable, and indivisible. They are being used for a variety of purposes, such as digital art, gaming, and music.

The surge in NFTs has led to an increased demand for NFT marketing and promotion. This has created a new market for crypto and web3 agencies that specialize in NFT marketing, such as Twitter NFT marketing, NFT marketing agencies, and web3 agencies. These agencies are helping creators and companies to promote and sell their NFTs.

While the investigation into Paxos is ongoing, the firm will continue to work constructively with the OCC. It remains to be seen what impact this investigation will have on the firm and the NFT market.

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