Paxos Applies for Federal Trust Charter to Expand Stablecoin Operations Nationwide

Paxos Trust Company, a stablecoin issuer backed by PayPal, has submitted an application for a national trust charter from the Office of the Comptroller of the Currency (OCC), marking a significant regulatory move in the crypto industry [1]. This initiative aims to elevate the company’s existing New York State Department of Financial Services (NYDFS) trust charter to a federal one, allowing it to operate nationwide under a unified regulatory framework. If granted, this charter would enhance Paxos’s credibility and regulatory alignment, potentially paving the way for access to federal payment systems [2].

Paxos has operated under a New York trust charter since 2015, becoming the first blockchain and tokenization platform to receive a limited-purpose trust charter in the United States. This license enabled the company to launch the first regulated stablecoin in 2018 but confined its operations to New York and states with reciprocal agreements. By pursuing a national charter, Paxos is seeking to remove these geographic constraints and streamline its regulatory compliance across all 50 states [3].

The company’s CEO, Charles Cascarilla, emphasized that the move reflects a commitment to offering the safest and most trusted infrastructure for financial institutions and consumers. He stated that Paxos believes the enhanced oversight from the OCC will strengthen its appeal to major financial players exploring stablecoin and tokenization solutions [4]. The timing aligns with the passage of the GENIUS Act, federal legislation that provides a clearer regulatory framework for stablecoins, reinforcing Paxos’s efforts to scale its services in a compliant manner [5].

Paxos is not alone in its pursuit of a national trust charter. Both Circle and Ripple have also submitted applications to the OCC, signaling a broader industry push for federal legitimacy in the crypto space. However, the process remains highly competitive and subject to intense scrutiny. Anchorage Digital, the only active crypto entity currently holding an OCC national trust charter, was granted its conditional charter in 2021. Its experience highlights the challenges of maintaining compliance under federal oversight, as Anchorage faced an OCC consent order in 2022 related to anti-money laundering (AML) lapses [6].

Critics, including the American Bankers Association and four other major trade groups, have raised concerns about the implications of granting such charters. In a July 17 letter, the groups argued that the applications lack sufficient detail for proper evaluation and urged the OCC to provide more transparency before moving forward. They caution that the policy shift represented by these charters—despite not involving insured deposits or lending—warrants deeper public scrutiny [7].

Paxos’s pursuit of a national trust charter is part of a broader strategy to solidify its position as a key player in the blockchain infrastructure space. The firm has already expanded its footprint through partnerships with major financial institutions such as Mastercard, Interactive Brokers, and MercadoLibre. It also manages stablecoins like PayPal’s PYUSD and gold-backed PAXG. Earlier, Paxos had collaborated with Binance to issue the Binance USD (BUSD) stablecoin, though the partnership was terminated in 2023 after New York DFS ordered Paxos to halt BUSD issuance [8].

The company recently agreed to a $48.5 million settlement with New York DFS over allegations that it failed to adequately monitor illicit activity tied to Binance [9]. This settlement underscores the regulatory challenges faced by crypto firms navigating a complex and evolving compliance landscape. The broader crypto industry has seen a growing emphasis on accountability and transparency, with Paxos’s recent moves reflecting a strategic alignment with these expectations.

As the OCC reviews applications for national trust charters, the outcomes will have significant implications for the future of crypto and stablecoin regulation in the U.S. The success or failure of Paxos’s application will not only shape its own trajectory but also influence the broader industry’s approach to gaining federal legitimacy and operational scalability [10].

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[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] https://cryptonews.com/news/trumps-crypto-empire-makes-1-5b-bet-on-its-own-wlfi-token/