Paxos has reapplied for a US national trust bank charter, aiming to enhance its services under federal oversight after its previous approval expired in 2023.
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Paxos aims to custody customer assets and settle payments nationwide.
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Paxos’ previous charter approval expired in March 2023 due to regulatory conditions.
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Paxos faces scrutiny following a $48.5 million settlement with NYDFS over compliance issues.
Paxos has reapplied for a US national trust bank charter to enhance its services under federal oversight, following the expiration of its previous approval.
| Aspect | Details | Notes |
|---|---|---|
| Previous Approval | Expired March 2023 | Conditional approval lapsed due to non-compliance. |
What is Paxos’ National Trust Bank Charter?
Paxos’ national trust bank charter is a federal designation that allows the company to custody customer assets and settle payments under federal oversight, enhancing its appeal to institutional clients.
Why Did Paxos Reapply for the Charter?
Paxos refiled for the charter after its initial approval expired due to regulatory pressures. The renewed application aims to solidify its compliance and operational standards.
Frequently Asked Questions
What is the significance of Paxos’ charter application?
Paxos’ application is significant as it aims to enhance regulatory compliance and operational capabilities, potentially attracting more institutional clients.
How does Paxos’ charter differ from traditional banks?
A national trust bank like Paxos cannot accept cash deposits or issue loans, focusing instead on custody and settlement services.
Key Takeaways
- Paxos is renewing its efforts for a national trust bank charter.: This could enhance its operational capabilities.
- Regulatory scrutiny has impacted Paxos’ previous charter approval.: The company is addressing compliance issues.
- Paxos aims to attract institutional clients.: Federal oversight may boost trust and transparency.
Conclusion
Paxos’ renewed bid for a national trust bank charter reflects its commitment to regulatory compliance and operational excellence. This move may significantly enhance its appeal to institutional clients, paving the way for future growth in the evolving crypto landscape.
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Paxos has reapplied for a US national trust bank charter, aiming to enhance its services under federal oversight after its previous approval expired.
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Paxos Trust Company, the crypto infrastructure company behind PayPal’s PYUSD stablecoin, has filed to convert its New York limited-purpose trust charter into a US national trust bank charter, renewing an effort that expired in 2023.
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If approved, the federal charter, issued by the Office of the Comptroller of the Currency (OCC), would allow Paxos to custody customer assets and settle payments nationwide under federal oversight, potentially boosting its appeal to institutional clients.
Paxos has reapplied for a US national trust bank charter to enhance its services under federal oversight, following the expiration of its previous approval.
Paxos’ 2021 Federal Charter Approval Expired Before Launch
Paxos first applied for the charter in December 2020 and received preliminary conditional approval from the OCC in April 2021. The green light allowed the company to begin meeting a series of pre-opening requirements, including capital, compliance, and operational benchmarks.
However, under OCC rules, conditional approvals expire if the bank is not opened within 18 months, unless extended. Paxos’s approval lapsed on March 31, 2023.
During that period, Paxos continued operating under its New York limited-purpose trust charter, which it has held since 2015. At the time, the company said it remained committed to pursuing federal oversight when conditions were right.
Regulatory Setbacks and Binance-Linked Penalties
Paxos didn’t say why its first charter with the OCC expired, but regulatory pressure was mounting at the time.
In February 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing Binance USD over compliance concerns, putting the company under heightened scrutiny and forcing it to end its relationship with Binance.
That scrutiny culminated last week, when the NYDFS reached a $48.5 million settlement with Paxos over its alleged failure to uphold anti-money laundering provisions in its partnership with Binance.
According to an announcement on Thursday, Paxos will pay the state of New York a $26.5 million fine and allocate another $22 million toward upgrading its compliance program.
Paxos’ renewed bid comes just weeks after the GENIUS Act established the first federal framework for stablecoin issuers. It also follows a wave of recent charter applications from other stablecoin issuers, including Ripple and Circle.
