The cryptocurrency infrastructure company Paxos Trust Company is the issuer of the PYUSD stablecoin under PayPal. The company has applied to convert its New York limited-purpose trust license into a national trust bank license in the United States, restarting the relevant process that was set to expire in 2023.
If approved, the federal license issued by the Office of the Comptroller of the Currency (OCC) will allow Paxos to custody customer assets under federal regulation and settle payment transactions nationwide, which is expected to further enhance its appeal to institutional clients. Unlike traditional banks, national trust banks are not permitted to accept cash deposits or issue loans.
Paxos co-founder and CEO Charles Cascarilla stated in a statement, "OCC's regulation will help us continue to uphold our commitment to the highest standards of safety and transparency."
Paxos first applied for the license in December 2020 and received preliminary conditional approval from the OCC in April 2021. After receiving approval, the company began to meet a series of pre-opening requirements, including capital, compliance, and operational standards.
However, according to OCC regulations, if a bank does not open within 18 months, the conditional approval will expire unless an extension is granted. Paxos's approval expired on March 31, 2023.
During this period, Paxos continued to hold the New York limited-purpose trust license obtained in 2015. The company stated at that time that it would still seek federal regulation at the appropriate time.
Paxos did not specify the exact reason for the expiration of its initial OCC license, but regulatory pressure was increasing at that time.
In February 2023, the New York Department of Financial Services (NYDFS) required Paxos to stop issuing Binance USD due to compliance issues, subjecting the company to stricter scrutiny and forcing it to terminate its partnership with Binance.
This regulatory action culminated last week, with the New York Department of Financial Services reaching a $48.5 million settlement agreement with Paxos over alleged failures to meet anti-money laundering obligations during its partnership with Binance.
According to the announcement made on Thursday, Paxos will pay a $26.5 million fine to New York State and allocate $22 million to upgrade its compliance program.
Paxos's resubmission of its application comes just weeks after the GENIUS Act established the first federal regulatory framework for stablecoin issuers. Meanwhile, other stablecoin issuers such as Ripple and Circle have also submitted license applications.
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Original: “Paxos Restarts U.S. Bank License Application as Stablecoin Regulatory Rules Take Shape”
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