Feb 11, 2023
NYDFS Investigates Paxos Trust Company
Paxos Trust Company, the New York-based financial services firm behind two of the most popular stablecoins in the world — Binance USD (BUSD) and Paxos Dollar (USDP) — is reportedly being investigated by the New York Department of Financial Services (NYDFS).
A source familiar with the matter confirmed to Bloomberg that the investigation is underway, without providing any further details.
The NYDFS spokesperson declined to comment on the ongoing investigation, but noted that the department is working to protect consumers from the various risks associated with investing in the crypto market.
Paxos is a major player in the web3 space. The firm is the issuer of BUSD, a US Dollar-collateralized stablecoin launched in partnership with Binance in September 2019. It is the third largest stablecoin in the world with a market cap exceeding $16 billion.
The company also created the Paxos Dollar (USDP) back in 2018, which is currently the sixth largest stablecoin with a market cap of about $875 billion. PAX Gold (PAXG) is another major product from Paxos, a gold-backed Ethereum token.
The firm is also behind the digital asset exchange itBit, which was launched in 2012 alongside the founding of Paxos.
The NYDFS issued Paxos with the “BitLicense” in 2015, which permits companies to conduct digital currency-related activities in the state of New York.
Paxos 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 receiving a preliminary approval in April 2021.
The company also claims on its website that its BUSD and USDP token reserves are backed wholly in U.S. Dollars and U.S.Treasuries.
If reports of the investigation are true, it wouldn’t be the first one initiated by the NYDFS over the last year. Coinbase Global U.S. reached a $100 million settlement with the New York regulator on Jan. 4 after they found that they failed to look over about 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
The NYDFS also published a stablecoin guidance report in May 2022 after the Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed. The report was designed to ensure stablecoin issuers fully back their assets and attest regularly.
Paxos is a major player in the web3 space, offering a range of services including the issuance of two of the world’s largest stablecoins, a gold-backed Ethereum token, and an online digital asset exchange. The NYDFS is now reportedly investigating the firm, though the exact motive behind the probe is currently unclear. Cointelegraph reached out to Paxos and Binance to comment on the matter but did not receive an immediate response.Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.