Paxos Trust Company, known for powering PayPal’s PYUSD stablecoin, has refiled its application to transition from a New York limited-purpose trust charter to a U.S. national trust bank charter. This move revives an earlier attempt that expired in 2023.
A federal charter granted by the Office of the Comptroller of the Currency (OCC) would enable Paxos to hold custody of client assets and manage national payment settlements under federal supervision. This enhanced regulatory status could make Paxos more attractive to institutional investors. Notably, a national trust bank cannot accept cash deposits or issue loans, differing from traditional banks.
Charles Cascarilla, Paxos co-founder and CEO, emphasized that oversight by the OCC would support the company’s longstanding dedication to security and transparency.
In December 2020, Paxos first applied for this federal charter and received conditional approval in April 2021. However, OCC regulations require that banks open within 18 months post-approval; otherwise, the conditional approval lapses unless extended. Paxos’s conditional approval expired by March 31, 2023.
During this period, Paxos continued operating under its 2015 New York limited-purpose trust charter while remaining committed to ultimately securing federal oversight.
Regulatory challenges emerged along the way. In early 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to halt issuing Binance USD due to compliance issues, ending their partnership with Binance.
More recently, Paxos agreed to a $48.5 million settlement with NYDFS related to alleged anti-money laundering lapses in its collaboration with Binance. The settlement includes a $26.5 million fine payable to New York and $22 million earmarked for compliance enhancements.
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.
- Paxos originally applied for a federal charter in 2020 and received conditional approval in 2021
- The company’s conditional approval expired in 2023 due to regulatory timing rules
- NYDFS ordered Paxos to stop Binance USD issuance and imposed a $48.5 million settlement
- GENIUS Act could pave the way for regulated stablecoin issuance under federal oversight
- Ripple and Circle have also filed for similar federal banking licenses
