Feb 11, 2023
NYDFS Investigates Paxos Trust Company
The New York Department of Financial Services (NYDFS) is reportedly investigating Paxos Trust Company, the stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP). An anonymous source familiar with the matter told Bloomberg on Feb. 10 that the exact nature of the investigation is still unclear.
Paxos is a New York-based firm founded in 2012 and is the issuer behind BUSD, the third largest stablecoin with a market cap of over $16 billion. It is also the issuer of the Paxos Dollar (USDP), the sixth largest stablecoin with a market cap of about $875 million. The firm is also the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
In 2015, the NYDFS issued Paxos with a “BitLicense”, which legally permits 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.
Paxos recently refuted rumors that the OCC may order Paxos to withdraw its application for its full banking charter. On its website, the firm also claims that its BUSD and USDP token reserves are backed wholly in U.S. Dollars and U.S.Treasuries.
The NYDFS issued a stablecoin guidance report in May 2022, following the collapse of Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC). The report was meant to ensure that stablecoin issuers fully back their assets and attest regularly.
This is not the first investigation initiated by the NYDFS in the last year. In January 2021, Coinbase Global U.S. reached a $100 million settlement with the regulator after they failed to look over about 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
Cointelegraph contacted Paxos and Binance to comment on the matter but did not receive an immediate response.
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