Paxos Pursues National Trust Bank Charter to Expand Crypto Operations

Paxos Trust Company, the issuer of PayPal’s PYUSD stablecoin, has announced it is applying for a national trust bank charter with the Office of the Comptroller of the Currency (OCC). This move aligns the firm with other prominent digital asset companies such as Circle and Ripple, which have also recently pursued similar federal banking authorizations. The application represents Paxos’s second attempt at securing this charter, as its earlier conditional approval expired in 2023 [1].

Paxos, which operates under a state-level trust charter from New York’s Department of Financial Services, aims to replace this with a federal charter that would provide broader regulatory oversight and greater operational flexibility. A national trust bank charter would allow the company to manage customer assets and process payments more efficiently, though it would not permit deposit-taking or lending activities. The firm emphasizes that the charter would not change its core business model but would offer “the highest level of regulatory oversight” recognized both domestically and internationally [1].

The application comes against a backdrop of increasing regulatory clarity for the digital asset industry. Just last month, President Donald Trump signed the first comprehensive federal legislation governing stablecoins, a critical component of the cryptocurrency ecosystem. The law is seen as a major step toward legitimizing the role of stablecoins in everyday payment systems. The timing of Paxos’s application suggests the firm is positioning itself to benefit from this regulatory evolution [1].

PYUSD, Paxos’s most significant product, has achieved a market capitalization exceeding $1 billion, according to company disclosures. As a stablecoin pegged to the US dollar, it serves as a vital infrastructure tool for crypto traders moving funds between different digital currencies. The rapid adoption of stablecoins is driven by their utility in facilitating seamless transactions and maintaining price stability, unlike more volatile cryptocurrencies like Bitcoin and Ether [1].

The firm has also recently resolved a major regulatory issue with New York authorities, agreeing to a $48.5 million settlement over its former partnership with Binance. That arrangement, which involved the issuance of the Binance USD stablecoin, was terminated in early 2023 following regulatory pressure. The settlement underscores the complex and evolving legal landscape for crypto companies seeking to operate within traditional financial frameworks [1].

Anchorage Digital is currently the only cryptocurrency firm to hold a national trust bank charter. However, with Circle, Ripple, and now Paxos all submitting applications for federal banking authorization, the industry is shifting toward a model where digital asset infrastructure firms operate under federal regulatory oversight. This trend signals a growing confidence in the long-term viability of crypto firms within the broader financial system [1].

Paxos’s renewed pursuit of a federal charter highlights the broader integration of cryptocurrency companies with traditional banking structures. If successful, the move would allow the firm to scale its operations under a more robust regulatory framework, reinforcing its position as a key player in the digital asset ecosystem. The outcome of its application will be closely watched by industry participants and regulators alike [1].

Source: [1] Paxos Targets National Trust Bank Status Following Circle, Ripple Moves (https://coinmarketcap.com/community/articles/689a1119f841533557a293e3/)