Feb 10, 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 source familiar with the matter told Bloomberg that the exact motive behind the probe is still unknown. When asked to comment, an NYDFS spokesperson said that the department is working to protect consumers from the risks associated with investing in the cryptocurrency market, adding that they are in contact with regulated entities to understand the volatility of the crypto market.
Paxos is the issuer of BUSD, a U.S. Dollar-collateralized stablecoin, and the third largest stablecoin with a market cap of over $16 billion. It is also the creator of Paxos Dollar (USDP), the sixth largest stablecoin with a market cap of around $875 billion, and PAX Gold (PAXG), a gold-backed-Ethereum token. In addition, Paxos operates digital asset exchange itBit, which it launched in 2012.
In 2015, the NYDFS issued Paxos with “BitLicense” which legally permits companies to conduct digital currency-related activities in New York. Paxos has 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.
The firm claims 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 in the past year. In January, 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.
In response to the Terra LUNA ecosystem collapse in May, 2022, the NYDFS released a stablecoin guidance report 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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