Feb 11, 2023
NYDFS Investigates Paxos Trust Company
The New York Department of Financial Services (NYDFS) is reportedly investigating Paxos Trust Company, a stablecoin issuer based in New York and the creator of Binance USD (BUSD) and Paxos Dollar (USDP).
A “person familiar with the matter” told Bloomberg in a Feb. 10 report that the exact motive behind the probe is currently unclear.
The NYDFS spokesperson declined to comment on the ongoing investigation but noted that the department is actively working to protect consumers from risks associated with investing in the cryptocurrency market.
Paxos has been operating since 2012, when it launched its digital asset exchange itBit. It is the third largest stablecoin, with a market cap currently exceeding $16 billion. It is also the creator of the Paxos Dollar (USDP), the sixth largest stablecoin with a market cap of about $875 billion, according to CoinGecko, and the founder of PAX Gold (PAXG), a gold-backed-Ethereum token.
The NYDFS issued Paxos with “BitLicense” in 2015, which legally permits companies to conduct digital currency-related activities in the state of New York.
Recently, Paxos 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 a preliminary approval in April, 2021.
Paxos 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 after Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed in May, 2022, to ensure stablecoin issuers fully back their assets and attest regularly.
The web3 space has seen an influx of new NFTs, crypto, and other digital assets, and Paxos has been at the center of it all. With the launch of Binance USD, Paxos has become a leader in the NFT marketing space, offering a range of services to help promote, sell, and market NFTs. Paxos has also become a popular web3 agency, offering a variety of services such as Twitter NFT marketing, NFT promotion, and NFT marketing agency services.
Paxos’s services have become increasingly popular with digital asset holders and investors, and the company has seen its fair share of success. However, with the NYDFS’s investigation, it remains to be seen if Paxos will continue to thrive in the web3 space. Cointelegraph reached out to Paxos and Binance to comment on the matter but did not receive an immediate response.
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