Paxos Renews Bid for U.S. Federal Trust Bank Charter Amid Regulatory Shifts

Paxos Trust Company, the stablecoin infrastructure firm behind PayPal’s PYUSD, has once again applied for a U.S. national trust bank charter from the Office of the Comptroller of the Currency (OCC). This follows an earlier attempt in 2021 that expired due to the 18-month deadline for activating a conditional approval [4]. The updated application seeks to convert its existing New York limited-purpose trust charter into a federal charter, a move that could position the firm under federal oversight while enhancing its credibility among institutional clients [1].

If granted, the charter would allow Paxos to custody customer assets and facilitate payments nationwide under a framework that emphasizes safety and transparency. The company’s leadership has emphasized its commitment to maintaining high regulatory standards, with CEO Charles Cascarilla stating that OCC oversight would reinforce this mission [1]. However, the national trust bank charter does not permit the company to accept retail deposits or issue loans—differentiating it from traditional banks but aligning it with the unique operational model of stablecoin issuers [2].

The timing of Paxos’ application coincides with broader industry efforts to align with emerging stablecoin regulations. The recently passed GENIUS Act represents one of the first federal attempts to define a regulatory pathway for stablecoin operators, and Paxos joins other firms like Ripple and Circle in seeking formal banking status. This trend reflects a growing consensus among stablecoin firms that regulatory clarity is essential for long-term growth and institutional adoption [3].

The renewed push also comes in the wake of recent regulatory challenges. In February 2023, New York regulators forced Paxos to cease issuing Binance USD, and last week, the firm agreed to a $48.5 million settlement with New York’s Department of Financial Services over alleged anti-money laundering failures linked to its previous relationship with Binance. Under the settlement, Paxos will pay a $26.5 million fine and allocate an additional $22 million to improve its compliance infrastructure [4].

Despite these hurdles, analysts suggest that a federal charter could provide Paxos with a competitive edge by establishing a regulatory precedent for stablecoin operations. It could also serve as a blueprint for other firms seeking to bridge the gap between digital assets and traditional finance [1].

Paxos has maintained a consistent focus on compliance and transparency, and its renewed application underscores a broader shift in the stablecoin sector toward formalized oversight. The outcome of its application will likely have significant implications for the future of stablecoin regulation and the integration of digital currencies into the U.S. financial system [3].

Source:

[1] Latest Crypto News – CoinDesk (https://www.coindesk.com/latest-crypto-news)

[2] Coin Stock USD Price (STOCK37174-USD) - Yahoo Finance (https://ca.finance.yahoo.com/quote/STOCK37174-USD/news/)

[3] Paxos renews push for US bank license as stablecoin rules take shape | خبرپو (https://khabarpu.com/b.htm?u=Paxos-renews-push-for-US-bank-license-as-stablecoin-rules-take-shape_Y29pbnRlbGVncmFwaC5jb20vbmV3cy9wYXhvcy11cy1iYW5rLWxpY2Vuc2Utc3RhYmxlY29pbi1ydWxlcz91dG1fc291cmNlPXJzc19mZWVkJmFtcDt1dG1fbWVkaXVtPXJzcyZhbXA7dXRtX2NhbXBhaWduPXJzc19wYXJ0bmVyX2luYm91bmQ=_Q29pbnRlbGVncmFwaA==)

[4] Other News | CryptoDnes.bg (https://cryptodnes.bg/en/news/others/)