Paxos Reapplies for U.S. Trust Bank Charter Amid Crypto Regulatory Shift

Paxos Trust Company has resubmitted its application for a U.S. national trust bank charter with the Office of the Comptroller of the Currency (OCC), following the lapse of its initial application in 2023. The firm first filed for the license in 2020 and received conditional approval in 2021, but was unable to complete the process within the required period. The renewed effort signals Paxos’ continued push to integrate digital assets into the U.S. financial system under a stronger regulatory framework [1].

A federal trust bank charter would enable Paxos to convert its existing New York-based limited-purpose trust license into a federally regulated charter. While the license would not permit the company to accept retail deposits or offer loans, it would allow it to custody digital assets, process faster payments, and operate with the “highest level of regulatory oversight” according to a source familiar with the application [1]. This move is seen as a strategic step toward offering institutional-grade financial services in the crypto space.

The reapplication comes amid a growing number of digital asset firms seeking banking charters. In recent months, both Circle and Ripple have also submitted national trust bank applications following the passage of a landmark U.S. stablecoin law signed in July. The law provides a federal regulatory framework for dollar-backed tokens, potentially paving the way for their broader use in everyday payments [1].

Paxos, which issues PayPal’s PYUSD stablecoin and previously co-issued Binance USD (BUSD), has faced regulatory challenges in the past. In 2023, New York regulators suspended BUSD and later ordered a $48.5 million settlement against Paxos for alleged failures in monitoring illegal activity tied to Binance. This followed a $4.3 billion resolution involving Binance’s former CEO [1]. The resubmission of its banking charter application appears to reflect a strategic effort to strengthen its compliance and governance frameworks.

While the application could set a precedent for crypto-native firms seeking to operate under traditional banking structures, regulatory hurdles remain significant. Authorities continue to emphasize anti-money laundering (AML) compliance and consumer protection, particularly as digital asset platforms seek to expand their roles in mainstream finance [1].

The outcome of Paxos’ application could influence the broader digital asset sector, either demonstrating a more accommodating regulatory environment or reinforcing a cautious stance. If approved, it would position Paxos as one of the first major crypto firms to operate under a federal trust bank charter, potentially reshaping the infrastructure for digital asset custody and compliance in the United States [1].

Source:

[1] Paxos Reapplies for US Trust Bank License After 2023 Lapse

https://financefeeds.com/paxos-reapplies-for-us-trust-bank-license-after-2023-lapse/