Paxos Under Investigation by the New York Department of Financial Services
Paxos Trust Company, the stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP), is reportedly being investigated by the New York Department of Financial Services (NYDFS).
The exact reason for the investigation is unclear at the moment.
BUSD is a U.S. Dollar-collateralized stablecoin that was launched after a partnership with Binance in September 2019.
Paxos Dollar (USDP) was launched in 2018 and is the sixth-largest stablecoin with a market cap of about $875 billion.
The company is also the creator of PAX Gold (PAXG), a gold-backed-Ethereum token.
Paxos is behind the digital asset exchange itBit, launched in 2012.
The NYDFS issued Paxos with “BitLicense” in 2015, allowing the company to conduct digital currency-related activities in the state of New York.
Reports of the investigation are yet to be confirmed. Paxos recently refuted rumors of being ordered to withdraw its application for a full banking charter by the U.S. Office of the Comptroller of the Currency (OCC).
To clarify speculation: Paxos has not been asked to withdraw its application for a national trust bank charter from the OCC, nor has it been denied the charter. Paxos continues to work constructively with the OCC.
— Paxos (@PaxosGlobal) February 8, 2023
Paxos claims its BUSD and USDP token reserves are backed wholly in U.S. Dollars and U.S. Treasuries.
NYDFS’s efforts to protect consumers
The NYDFS declined to comment on ongoing investigations. The department is working to protect consumers from the risks associated with investing in cryptocurrency.
The NYDFS reached a $100 million settlement with Coinbase Global U.S. in January 2022 for failing to oversee about 100,000 suspicious transactions.
In May 2022, the NYDFS published a stablecoin guidance report to ensure stablecoin issuers fully back their assets and attest regularly.
Previous Investigations by NYDFS
The investigation of Paxos wouldn’t be the first one initiated by the NYDFS over the last year.
The image is from Paxos official website.