Paxos Trust Company is a New York-based stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP) is reportedly being investigated by the New York City Department of Financial Services (NYDFS).
“A person familiar with the matter,” Bloomberg told Bloomberg in a Feb. 10 report, that the exact motives for the investigation are currently unclear.
A spokesperson for the NYDFS declined to comment on ongoing investigations, but noted that the department is working extensively to protect consumers from the risks associated with investing in the cryptocurrency market:
“The Department is in constant contact with regulated entities to understand the vulnerabilities and risks to consumers and institutions themselves due to the volatility of the crypto market that we are facing.”
Paxos has issued BUSD — a USD-backed stablecoin — since the firm partnered with Binance in September 2019. It is the third largest stablecoin and currently has a market capitalization of over $16 billion.
He is also the creator of the Paxos Dollar (USDP), which was launched in 2018. Today it is the sixth largest stablecoin with a market capitalization of around $875 billion. according to at CoinGecko and is the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
The company is also behind the digital asset exchange itBit, which it launched in 2012 with the founding of Paxos.
In 2015, the NYDFS issued Paxos a “BitLicense”, which legally allows companies to conduct digital currency-related activities in New York State.
Paxos recently denied gossip that the U.S. Office of the Comptroller of the Currency (OCC) could order Paxos to withdraw its application for a full banking charter, despite the firm only receiving pre-approval in April 2021.
To clarify the speculation: Paxos was not asked to withdraw its application for a national trust bank charter from the OCC, nor was it denied a charter. Paxos continues to work constructively with the OCC.
— Paxos (@PaxosGlobal) February 8, 2023
Paxos also states on its website that its reserves of BUSD and USDP tokens are fully backed by US dollars and UST Treasuries.
New York State Issues Guidance for Banks Aiming to Engage in Cryptocurrency
If the investigation reports are correct, this would not be the first investigation initiated by the NYDFS in the past year.
On Jan. 4, Coinbase Global US reached a $100 million settlement with a New York City regulator after they found they failed to verify about 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
Shortly after the Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed in May 2022, the NYDFS published a stablecoin guidance report to ensure that stablecoin issuers are fully maintaining their holdings and confirming regularly.
Cryptooshala reached out to Paxos and Binance to comment on the matter, but received no immediate response.
Credit : cointelegraph.com
