Stablecoin issuer Paxos probed by New York regulators

Paxos Trust Company — the New York-based stablecoin issuer down Binance USD (BUSD) and Paxos Dollar (USDP) — is reportedly being investigated by the New York Department of Financial Services (NYDFS).

A “person acquainted with the matter” told Bloomberg successful a Feb. 10 study that the nonstop motive down the probe is presently unclear.

An NYDFS spokesperson declined to remark connected ongoing investigations but noted that the section is broadly moving to support consumers from risks associated with investing successful the cryptocurrency market:

“The section is successful continuous interaction with regulated entities to recognize vulnerabilities and risks to consumers and the institutions themselves from crypto marketplace volatility we are experiencing.”

Paxos is the issuer of BUSD — a U.S. Dollar-collateralized stablecoin — since the steadfast struck a concern with Binance successful September 2019. It is the 3rd largest stablecoin, with a marketplace headdress presently exceeding $16 billion.

It is besides the creator of the Paxos Dollar (USDP) which was launched successful 2018. Today it is the sixth largest stablecoin with a marketplace headdress of astir $875 billion, according to CoinGecko, and is the laminitis of PAX Gold (PAXG), a gold-backed-Ethereum token.

The institution is besides down integer plus speech itBit, which it launched successful 2012 alongside the founding of Paxos.

The NYDFS issued Paxos with “BitLicense” successful 2015, which legally permits companies to behaviour integer currency-related activities successful the authorities of New York.

Paxos precocious refuted rumors that the U.S. Office of the Comptroller of the Currency (OCC) whitethorn bid Paxos to retreat its exertion for its afloat banking charter, contempt the steadfast lone receiving a preliminary support successful April, 2021.

To clarify speculation: Paxos has not been asked to retreat its exertion for a nationalist spot slope charter from the OCC, nor has it been denied the charter. Paxos continues to enactment constructively with the OCC.

— Paxos (@PaxosGlobal) February 8, 2023

Paxos besides claims connected its website that its BUSD and USDP token reserves are backed wholly successful U.S. Dollars and U.S.Treasuries.

Related: New York State issues guidance for banks seeking to prosecute successful activities with crypto

If reports of the probe are true, it wouldn’t beryllium the archetypal 1 initiated by the NYDFS implicit the past year.

Coinbase Global U.S. reached a $100 cardinal settlement with the New York regulator connected Jan. 4 aft they recovered that they failed to look implicit astir 100,000 suspicious transactions from customers who opened accounts without capable inheritance checks.

Shortly aft Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed successful May, 2022, the NYDFS published stablecoin guidance study to guarantee stablecoin issuers afloat backmost their assets and attest regularly.

Cointelegraph reached retired to Paxos and Binance to remark connected the substance but did not person an contiguous response.