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Stablecoin giant Paxos confirmed to be under investigation by New York financial authorities.
The New York Department of Financial Services (NYDFS) has acknowledged an ongoing probe.
Known for running Binance USD (BUSD), Paxos is an industry leader in stablecoin technology. Offerings also include the native Paxos stablecoin USDP.
It is not confirmed whether these stablecoins are the target of the investigation. NYDFS refuses to comment.
Paxos is a giant in the space, and also operates an exchange – ItBit.
This could be what has drawn attention from authorities, as the SEC forced Kraken this week to close staking facilities.
Another project that could be raising eyes is Paxos’ gold-backed cryptocurrency PAXG. A real-world asset (RWA) token that stores gold in Brinks Vault, London for investors.
PAXG, BUSD, and USDP all remain pegged at the time of writing.
Investigation into Paxos follows application for Full Banking Charter
The investigation comes following an application by Paxos for a full banking charter. Some pundits allege this has worried central finance authorities.
The US Office of the Comptroller of the Currency (OCC) is rumoured to have asked Paxos to withdraw the application.
Paxos denies this unreservedly.
What we do know is that the OCC provided a provisional banking charter to Paxos in 2021. Suggesting the authority isn’t completely against the idea of licensing the issuer properly.
It is also known that Paxos possess a virtual currency license from the NYDFS. Known as a Bit Licence, this also suggests that Paxos has been compliant with ongoing regulations.
Indeed, after the implosion of the Luna ecosystem because of TerraUSD. The NYDFS published guidelines for stablecoin issuers to follow. No doubt, Paxos observed these requests as part of ongoing efforts to secure its full banking charter.
Yet, as regulators seem poised to move on legislating the crypto industry this year – markets are on edge. Especially as Paxos operates BUSD at a time where uncertainty clouds the Binance exchange.
An expanded investigation into the premier exchange’s flagship stablecoin could spell big trouble for the industry.
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