New York Officials Investigating Stablecoin Issuer Paxos
The cause for the probe is unknown, but the New York regulator wants to safeguard consumers this year.
The New York Department of Financial Services is investigating Binance USD (BUSD) and Paxos Dollar (USDP) issuer Paxos Trust Company (NYDFS).
A “person familiar with the matter” told Bloomberg on Feb. 10 that the probe’s motivation is unknown.
The NYDFS representative declined to comment on current investigations but said the department is protecting consumers from bitcoin market risks:
“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.”
Since joining Binance in September 2019, Paxos has created BUSD, a U.S. Dollar-collateralized stablecoin. The third-largest stablecoin, its market worth exceeds $16 billion.
It created the 2018 Paxos Dollar (USDP). According to CoinGecko, it is the sixth biggest stablecoin with a market worth of $875 billion and the founder of PAX Gold (PAXG), a gold-backed Ethereum token.
Along with Paxos, the business created digital asset exchange itBit in 2012.
In 2015, the NYDFS granted Paxos a “BitLicense” for digital currency activities in New York.
Despite gaining a preliminary approval in April 2021, Paxos denied speculations that the U.S. Office of the Comptroller of the Currency (OCC) may require it to withdraw its complete banking charter application.
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 states on its website that its BUSD and USDP token reserves are backed entirely by U.S. dollars and treasuries.
The NYDFS has launched many investigations in the past year.
On Jan. 4, Coinbase Global U.S. settled with the New York regulator for $100 million after failing to review 100,000 suspected transactions from consumers who created accounts without background checks.
The NYDFS provided stablecoin recommendations in May 2022 when Terra LUNA ecosystem and its algorithmic stablecoin TerraClassicUSD (USTC) crashed.
