New York Regulator Investigates Stablecoin Issuer Paxos

The New York State Department of Financial Services (NYDFS) has opened an investigation into Paxos Trust, the company issuing Binance's BUSD stablecoin, for violations of state laws (NYDFS).

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Quick Facts

• It is unclear exactly what the scope of the investigation is, but an unnamed source familiar with the matter confirmed to Trade Algo that the investigation is underway.

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• In a statement to Trade Algo, a spokeswoman for the NYDFS said the regulator was unable to comment on ongoing investigations at the moment.

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• Aside from issuing a stabilized coin that is pegged to the U.S. dollar, Paxos has also issued a stablecoin which is pegged to the U.S. dollar, the Pax Dollar (USDP), which according to CoinMarketCap has the sixth largest market capitalization.

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• Jonas Betz, a crypto analyst based in Germany, says the probe may be part of a larger U.S. crypto debunking effort, which could pose a risk to the financial system, according to Betz. “Crypto investors should be aware of a possible U.S. de-banking operation led by the Fed and Office of the Comptroller of the Currency (OCC), which, according to speculations, has prepared measures that are deemed draconian, aimed at killing crypto,” wrote Betz to Forkast on LinkedIn.

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• A statement released by Paxos on Thursday denied speculations that the company had been asked to withdraw its application for a charter as a national trust bank by the OCC, or that it may have been denied its charter, adding that “Paxos continues to work constructively with the OCC.”

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• BitLicense is a license that is required for crypto service providers to operate in the state of New York. By the end of 2015, Paxos had been granted a charter by the regulator allowing them to operate as a limited-purpose trust company.