Paxos Pursues National Trust Bank Charter After $48.5M Settlement with NYDFS

Paxos Trust Company has submitted an application to the Office of the Comptroller of the Currency (OCC) to convert its New York trust charter into a U.S. national trust bank charter, marking a renewed effort to secure federal banking authority. This follows a $48.5 million settlement with New York regulators over its partnership with Binance, which led to the suspension of its Binance USD stablecoin. The previous conditional approval for a federal charter, granted in 2021, expired in March 2023 without the company launching operations under it. The new application is aligned with recent regulatory developments, including the passage of the GENIUS Act, which established a federal framework for stablecoin regulation [1].

The national trust bank charter, if approved, would allow Paxos to operate under federal supervision across all 50 states, enabling it to custody customer assets and process nationwide payments. However, it would not be permitted to accept cash deposits or offer traditional banking services like lending. This is a significant step for Paxos, which has previously operated under a New York-specific trust charter since 2015. The company has emphasized its commitment to regulatory compliance and safety, with CEO Charles Cascarilla stating that OCC oversight will help it maintain high standards of transparency [2].

The regulatory settlement with New York’s Department of Financial Services (NYDFS) revealed that Paxos had failed to adequately monitor Binance for anti-money laundering violations. Under the terms of the settlement, the company agreed to pay $26.5 million to New York and an additional $22 million to strengthen its compliance infrastructure. The NYDFS had previously ordered Paxos to cease issuing Binance USD over concerns that the stablecoin was being used by U.S. customers in violation of state laws [3].

Paxos is not the only cryptocurrency company seeking a federal banking charter. Competitors like Circle, the issuer of USDC, and Ripple have also submitted similar applications. This trend reflects a broader industry push to align with traditional financial systems amid increasing regulatory clarity. The recent expansion of the OCC’s authority to allow national banks to custody crypto assets has further encouraged these efforts. A Paxos spokesperson noted that federal oversight could enable the company to offer more robust solutions to institutional clients, especially at a time when stablecoin legislation is being implemented at the federal level [4].

The process for obtaining a national trust bank charter remains complex, and the OCC has not yet indicated a timeline for a decision. The application will undergo public comment and rigorous regulatory review, with both supporters and critics closely monitoring the outcome. For Paxos, the stakes are high: approval could open new growth opportunities, while rejection may force further delays in its regulatory strategy.

The settlement and charter application also highlight the broader challenges faced by stablecoin issuers in navigating a fragmented regulatory landscape. While the GENIUS Act has provided a federal foundation, state-level enforcement actions remain influential, as demonstrated by the NYDFS' actions against Paxos. This underscores the importance of consistent compliance and the potential for continued regulatory engagement in the evolving crypto sector [5].

Source:

[1] Paxos renews push for US bank license as stablecoin rules ... (https://cointelegraph.com/news/paxos-us-bank-license-stablecoin-rules)

[2] Paxos Makes Second Push for US Banking License After ... (https://coincentral.com/paxos-makes-second-push-for-us-banking-license-after-48m-binance-fine/)

[3] Paxos Refiles US National Trust Bank Charter Application ... (https://www.ainvest.com/news/paxos-refiles-national-trust-bank-charter-application-regulatory-shifts-2508/)

[4] Paxos joins spate of crypto companies applying for US trust ... (https://www.reuters.com/sustainability/boards-policy-regulation/paxos-joins-spate-crypto-companies-applying-us-trust-bank-licenses-2025-08-11/)

[5] title: Paxos Seeks Federal Banking Charter After $48.5 Million Regulatory Settlement (https://blockonomi.com/paxos-seeks-federal-banking-charter-after-48-5-million-regulatory-settlement/)