In recent news, the financial authorities in New York have confirmed that they are currently investigating stablecoin giant, Paxos. The New York Department of Financial Services (NYDFS) has declined to comment on the exact nature of the investigation but sources suggest that it is related to the full bank charter requested by Paxos.
Stablecoin Leader: Paxos
Paxos is a leading figure in the crypto space and operates an exchange, ItBit. It is also known for running Binance USD (BUSD) and Paxos native stablecoin, USDP. At the time of writing, PAXG, BUSD, and USDP have not lost their pegs and continue to function as usual.
Paxos’ Request for a Full Banking Charter
The investigation follows a request for a full bank charter filed by Paxos. This license would allow Paxos to engage in a wide range of banking activities, including deposits, loans, and other financial services. This request has raised concerns among central financial authorities, leading to rumors that the US Office of the Comptroller of the Currency (OCC) has asked Paxos to withdraw its claim. However, Paxos denies these rumors and has received an interim banking charter from the OCC in 2021.
Virtual Currency License and the Bit License
Paxos has a virtual currency license issued by the NYDFS, known as the Bit License. This license suggests that Paxos has complied with the applicable regulations and guidelines published by the NYDFS. After the TerraUSD implosion and the collapse of the Luna ecosystem, the NYDFS released guidelines for stablecoin issuers, and there is no doubt that Paxos observed these rules as part of its efforts to obtain its full banking charter.
Cryptocurrency Industry on Edge
As regulators look set to legislate the cryptocurrency industry this year, markets are on edge, especially since Paxos is mining BUSD at a time when uncertainty hangs over the Binance exchange. An investigation into the stablecoin of the world’s largest crypto exchange could lead to big problems within the cryptocurrency industry, and this investigation into Paxos has caused a ripple of uncertainty in the crypto community.
In conclusion, while the exact nature of the investigation into Paxos is unknown, the NYDFS has confirmed that it is underway. Paxos, a leading figure in the crypto space and the operator of the ItBit exchange, has a virtual currency license and has received an interim banking charter from the OCC in 2021. However, the request for a full bank charter has raised concerns among central financial authorities, leading to the current investigation. As regulators look set to legislate the cryptocurrency industry, markets are on edge, and the investigation into Paxos has added to the uncertainty.