Feb 11, 2023
NYDFS Investigates Paxos Trust Company
Paxos Trust Company, the New York-based stablecoin issuer behind 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 situation told Bloomberg in a recent report that the exact motive behind the probe is currently unknown.
The NYDFS is dedicated to protecting consumers from the risks associated with investing in the cryptocurrency market. A spokesperson for the department stated that they are in constant contact with regulated entities to identify and address any potential vulnerabilities.
Paxos has been active in the crypto space since the launch of itBit in 2012. The firm has since issued BUSD, a U.S. Dollar-collateralized stablecoin, and the Paxos Dollar (USDP). It is also the creator of PAX Gold (PAXG), a gold-backed-Ethereum token. The NYDFS granted the company a “BitLicense” in 2015, allowing them to legally 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 them to withdraw their application for a full banking charter. The firm had received preliminary approval in April 2021 and continues to work constructively with the OCC.
Paxos claims that their BUSD and USDP token reserves are backed wholly in U.S. Dollars and U.S.Treasuries. The company has also been focusing on NFT promotion, marketing, and selling. They have been leveraging Twitter NFT marketing, utilizing a web3 agency to increase their presence in the space.
If reports of the investigation are true, this would not be the first one initiated by the NYDFS in the last year. Coinbase Global U.S. was hit with a $100 million settlement in January 2021 after failing to properly investigate suspicious customer transactions.
In response, the NYDFS published a stablecoin guidance report in May 2022 to ensure that stablecoin issuers fully back their assets and attest regularly.
Cointelegraph reached out to Paxos and Binance for comment on the matter but did not receive an immediate response.
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