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Paxos trust company - the new york-based stablecoin issuer behind BINANCE usd and paxos dollar () - under investigation by the Financial Services Department of New York.
A "knowledgeable person" said Bloomberg in February. Note that the exact pattern behind the probe is uncertain at this time.
A spokesperson for NYDFS declined to comment on ongoing investigations, but noted that the Department is working across the board to protect consumers from the risks associated with investing in the cryptocurrency market:
"The Department is in ongoing communication with regulatees to understand the vulnerabilities and risks to consumers and institutions themselves of the volatility of the crypto markets that we are experiencing."
Paxos has issued BUSD — a U.S. Dollar-collateralized stablecoin — since the firm struck a partnership with Binance in September 2019. This is the third largest institution with a market capitalization of more than $16 billion.
This is also the creator of the dollar paxos (usdp) that was launched in 2018. Today it is the sixth largest stablecoin with a market cap of about $875 billion, according to CoinGecko, and is the founder of PAX Gold (PAXG), a gold-backed-Ethereum token.
The company is also behind itbit of digital asset trading, which it launched in 2012 at the same time as the foundation of paxos.
Nydfs issued paxos with "bitlicense" in 2015, which legally allows businesses to carry out activities related to digital money in New York State.
Paxos recently refuted rumors that the U.S. Office of the Comptroller of the Currency (OCC) may order Paxos to withdraw its application for its full banking charter, despite the firm only receiving a preliminary approval in April, 2021.
To clarify conjecture: Paxos was not invited to withdraw its National Bank Trust Charter application to the OCC, and the charter was not declined. Paxos continues to work constructively with the OCC.
— Paxos (@PaxosGlobal) February 8, 2023
Paxos also states on its website that its BUSD and USDP token holdings are fully guaranteed in US dollars and US Treasury bills.
Related: New York State issues guidance for banks seeking to engage in activities with crypto
If the investigative reports are true, this would not be the first time the NYDFS has done so in a year.
Coinbase Global U.S. reached a $100 million settlement with the New York regulator on Jan. 4 when they found that they had not reviewed approximately 100,000 suspicious transactions of clients who had opened accounts without adequate background checks.
Shortly after Terra LUNA ecosystem and its failed algorithmic stablecoin TerraClassicUSD (USTC) collapsed in May, 2022, the NYDFS published stablecoin guidance report to ensure stablecoin issuers fully back their assets and attest regularly.
Cointelegraph contacted paxos and binance to comment on the issue but was not provided with an immediate response.
