Paxos Under Fire: NY Regulator Investigates Stablecoin Issuer BUSD

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Paxos Under Investigation

  • Paxos, issuer of Binance USD (BUSD) and Paxos stablecoin USDP, is reportedly under investigation by the New York Department of Financial Services (NYDFS).
  • The company recently applied for a full banking charter, but some central finance authorities have raised concerns.
  • The investigation into Paxos follows the NYDFS publishing guidelines for stablecoin issuers to follow.

Overview

New York-based blockchain infrastructure company Paxos is being investigated by the New York Department of Financial Services (NYDFS) over its issuance of Binance USD (BUSD) and native Paxos stablecoin USDP. Paxos has also applied for a full banking charter which has drawn attention from certain central finance authorities. Furthermore, the NYDFS has published guidelines for stablecoin issuers to follow in order to assess if they abide by relevant regulations. The US Office of the Comptroller of the Currency (OCC) provided a provisional banking charter to Paxos in 2021.

Issuance Of Binance USD & USDP

Paxos issues both Binance USD (BUSD) and its native PAXOS Tokenized U.S Dollar (USDP). Both remain pegged at the time of writing as they are designed to be 1:1 fiat currency backed tokens on public blockchains like Ethereum or Stellar. Although it is unclear why this has caught the eye of regulators, it could be related to recent news that Kraken was forced by SEC to close their staking facilities.

PAXG Gold-backed Cryptocurrency

Another project that could be raising eyes is Paxo’s gold-backed cryptocurrency PAXG. This token stores gold in Brinks Vault located in London so investors can buy and sell with ease whilst still having exposure to real-world assets (RWA). It remains unclear how much gold is stored there or what impact this could have on markets or current investigations into Paxos’s activities.

Application For Full Banking Charter

Despite rumors that OCC requested that Paxos withdraw their application for a full banking charter – they denied these claims stating they continue “to work constructively with OCC” on this matter. This provides some reassurance but as we enter 2021 with more regulatory scrutiny than ever before – all eyes will be on how this develops further down the line.

Conclusion
It appears clear that despite having obtained a BitLicense from NYDFS and gaining Major Payments Institution license from Singapore – many central finance authorities remain concerned about what regulatory steps should be taken when issuing such tokens like BUSD & PAXG given their potentially volatile nature . As such , an expanded investigation into these matters could spell big trouble for not only Paxo s but other exchanges too .