Feb 10, 2023
NYDFS Investigates Paxos Trust Company
The New York Department of Financial Services (NYDFS) is reportedly investigating Paxos Trust Company, the issuer of Binance USD (BUSD) and Paxos Dollar (USDP). According to a person familiar with the matter, the exact motive behind the probe is currently unclear.
Paxos is a New York-based stablecoin issuer that has been active in the cryptocurrency market since 2012. In 2015, the company was issued a “BitLicense” by the NYDFS, which legally permits companies to conduct digital currency-related activities in the state of New York.
Paxos is the third-largest stablecoin issuer, with a market cap currently exceeding $16 billion. It is the founder of BUSD, a U.S. Dollar-collateralized stablecoin that was launched in partnership with Binance in September 2019. Paxos also created the Paxos Dollar (USDP) in 2018, which is the sixth-largest stablecoin with a market cap of about $875 billion, according to CoinGecko. The firm is also the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
Paxos recently refuted rumors that the U.S. Office of the Comptroller of the Currency (OCC) may order the company to withdraw its application for its full banking charter, despite the firm only receiving a preliminary approval in April 2021.
The NYDFS is working to protect consumers from the risks associated with investing in the cryptocurrency market. To this end, the department issued a stablecoin guidance report in May 2022 to ensure that stablecoin issuers fully back their assets and attest regularly.
In January 2021, Coinbase Global U.S. reached a $100 million settlement with the New York regulator after they failed to look over about 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
Cointelegraph reached out to Paxos and Binance to comment on the matter but did not receive an immediate response.
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