Stablecoin company Paxos investigated by regulator

Last Updated: 12 February 2023

The New York Department of Financial Services (NYDFS) has launched an investigation into Paxos. That is an issuer of a number of stablecoins.

New York

The scope of the investigation is not entirely known, CoinDesk reports. A NYDFS spokesperson shared only that they cannot comment on ongoing investigations. So that does imply something is going on.

Paxos has a number of stablecoins on the market, including the Pax Dollar (USDP) and the Binance USD (BUSD). The latter is a stablecoin from crypto exchange Binance offered through Paxos’ white-label service.

The company was recently in the news because of rumours that the US Office of the Comptroller of the Currency (OCC) wants to take away the bank’s charter again. In 2021, they were one of the first crypto companies to be granted this provisional bank charter.

As a regulator of the federal banking sector, the OCC has a nice finger in the pie. Paxos has denied these rumours.

Under scrutiny

This time it is the NYDSF that is setting its sights on Paxos. They regulate financial services and products such as insurance and banking in New York State. An ongoing investigation by a state regulator suggests that the company is being watched more closely than competitors.

Paxos, by the way, does just license virtual currencies, the infamous BitLicenses. The NYDFS, in turn, is the issuer of these licences.

NYDFS published guidelines for stablecoins in June, which included rules on token coverage (which had to be separate from customer funds). This followed the collapse of Luna Foundation Guard’s UST stablecoin.

Paxos has not yet responded to rumours of the ongoing investigation.

  • Ivan Brightly

    Ivan came across the topic of cryptocurrencies in early 2016 and, as an author and enthusiast, has been intensively involved with the topics of cryptocurrencies, blockchain and STOs ever since.

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