Paxos Trust Company โ The New York-based stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP), is reportedly under investigation by the New York Department of Financial Services (NYDFS).
A "person familiar with the matter" told Bloomberg in a February 10 report that the exact motive behind the investigation is currently unclear.
A NYDFS spokesperson declined to comment on the ongoing investigations, but noted that the department is working extensively to protect consumers from the risks associated with investing in the cryptocurrency market:
"The department is in ongoing contact with regulated entities to understand the vulnerabilities and risks to consumers and the institutions themselves due to the volatility of the crypto market that we are experiencing."
Paxos has issued BUSD - a US dollar-collateralized stablecoin - since the company partnered with Binance in September 2019. It is the third-largest stablecoin, with a market capitalization currently exceeding $16 billion.
It is also the creator of the Paxos Dollar (USDP) which was launched in 2018. Today it is the sixth largest stablecoin with a market capitalization of around $875 billion. according to CoinGecko, and is the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
The company is also behind the digital asset exchange itBit, which it launched in 2012 in conjunction with the Paxos foundation.
The NYDFS issued Paxos with a "BitLicense" in 2015, which legally allows companies to conduct digital currency-related activities in New York State.
Paxos recently refuted rumors that the US Office of the Comptroller of the Currency (OCC) can order Paxos to withdraw its entire bank authorization application, even though the company only received one preliminary approval in April 2021.
To clear up the speculation: Paxos has not been asked to withdraw its application for a national trust bank charter from the OCC, nor has the charter been denied. Paxos continues to work constructively with the OCC.
โPaxos (@PaxosGlobal) February 8, 2023
Paxos also claims on its website that its BUSD and USDP token pools are backed entirely in US dollars and USTreasuries.
Related: New York State Issues Guidance for Banks Looking to Engage in Cryptocurrency Activities
If the reports of the investigation are true, it would not be the first launched by the NYDFS in the past year.
Coinbase Global US reached a USD 100 million agreement with the New York regulator on January 4 after they found they failed to review about 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
shortly after Terra LUNA Ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) crashed in May 2022, the Guide to stablecoins published by the NYDFSand report to ensure that stablecoin issuers fully support their assets and certify regularly.
Cointelegraph reached out to Paxos and Binance for comment on the matter, but did not receive an immediate response.
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