The New York Department of Financial Services is apparently looking into Paxos Trust Company, the stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP) (NYDFS).
Since the company partnered with Binance in September 2019, Paxos has released BUSD, a stablecoin backed by U.S. Dollars. With a market cap that is currently above $16 billion, it is the third-largest stablecoin.
although it has been rumoured that the New York regulator will step up consumer protection operations this year.
The New York Department of Financial Services is apparently looking into Paxos Trust Company, the stablecoin issuer behind Binance USD (BUSD) and Paxos Dollar (USDP), which is located in New York (NYDFS). According to a person familiar with the matter, the exact motive behind the probe is currently unknown.
When asked to comment on the ongoing investigation, an NYDFS spokesperson declined to provide any details but did emphasize the department's commitment to protecting consumers from the risks associated with investing in the cryptocurrency market. They stated,
“The department is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers and the institutions themselves from crypto market volatility we are experiencing.”
Paxos has been issuing BUSD, a U.S. Dollar-collateralized stablecoin, since its partnership with Binance in September 2019. It is the third largest stablecoin in the market, with a market cap of over $16 billion. Additionally, Paxos is the creator of the Paxos Dollar (USDP), which was launched in 2018 and is now the sixth largest stablecoin with a market cap of approximately $875 billion, according to CoinGecko. The company is also the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
In 2012, Paxos launched its digital asset exchange, itBit, alongside its founding. The New York Department of Financial Services (NYDFS) granted Paxos a “BitLicense” in 2015, which legally permits companies to conduct digital currency-related activities in the state of New York.
Recently, Paxos refuted rumors that the U.S. Office of the Comptroller of the Currency (OCC) may order the firm to withdraw its application for a full banking charter, despite the fact that it had only received preliminary approval in April 2021.
Paxos asserts that its BUSD and USDP tokens are fully backed by U.S. Dollars and U.S. Treasuries, as stated on its website. This provides users with the assurance that their tokens are backed by a reliable and secure source of value.
If reports of the investigation are accurate, it would not be the first one initiated by the New York Department of Financial Services (NYDFS) over the last year. In January 2021, Coinbase Global U.S. reached a staggering $100 million settlement with the NYDFS after they failed to properly monitor over 100,000 suspicious transactions from customers who opened accounts without sufficient background checks.
Then, in May 2022, the NYDFS released a stablecoin guidance report in response to the collapse of the Terra LUNA ecosystem and its algorithmic stablecoin TerraClassicUSD (USTC). The report was designed to ensure that stablecoin issuers fully back their assets and attest regularly.
Reports reached out to Paxos and Binance for comment on the matter, but did not receive an immediate response.
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