Paxos Trust Company, known for launching PayPal's PYUSD stablecoin, has refiled its application for a federal bank charter after the previous attempt expired.
Transition to Federal Bank Charter
Paxos has resubmitted its application for a federal bank charter that would allow the company to hold custody of client assets and manage national payments under federal supervision. Achieving this status could enhance Paxos's appeal to institutional investors. Notably, a national trust bank cannot accept cash deposits or issue loans, setting it apart from traditional banks.
Regulatory Challenges and Consequences
In early 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to halt issuing Binance USD due to compliance issues, ending its partnership with Binance. Recently, Paxos agreed to a $48.5 million settlement with NYDFS related to alleged anti-money laundering lapses. This settlement includes a $26.5 million fine payable to New York and $22 million designated for compliance enhancements.
Outlook for Paxos and the Stablecoin Market
Paxos’s renewed charter application aligns with the introduction of the GENIUS Act, which proposes the first federal framework regulating stablecoin issuers. This move follows similar applications from other stablecoin providers like Ripple and Circle, indicating a growing push toward structured regulation in this space.
Paxos’s renewed application for a federal charter highlights the company's commitment to high standards of transparency and security, which could significantly impact the stablecoin market and attract new investors.
