Paxos Resubmits Application for U.S. National Trust Bank Charter

Paxos Trust Company, a key player in the stablecoin market and operator of PayPal’s PYUSD stablecoin, has resubmitted its application to the Office of the Comptroller of the Currency (OCC) for a U.S. national trust bank charter. This marks a renewed effort following the expiration of its conditional approval in March 2023 due to regulatory time limits [1]. A national charter would allow Paxos to operate under federal supervision, enhancing its ability to manage custody and national payment settlements, while also improving its appeal to institutional investors [2].

The company’s previous application, submitted in December 2020, received conditional approval in April 2021, but failed to meet the 18-month operational window required by OCC rules [2]. During this period, Paxos continued operating under its New York limited-purpose trust charter while preparing for the next phase of its regulatory strategy. The decision to refile now appears to be influenced by a shifting regulatory landscape, particularly with the introduction of the GENIUS Act, which aims to establish a federal framework for stablecoin regulation [3].

Paxos’s renewed application comes amid broader scrutiny of stablecoin operations, especially after the New York Department of Financial Services (NYDFS) ordered the company to cease issuing Binance USD in early 2023 due to compliance concerns. The firm also settled a $48.5 million fine with NYDFS in a separate case related to alleged anti-money laundering deficiencies in its partnership with Binance [2]. These incidents highlight the increasing regulatory expectations for transparency and compliance in the stablecoin sector.

The pursuit of a national charter is not unique to Paxos. Competitors such as Ripple and Circle are also seeking similar federal banking licenses, reflecting the industry’s push for greater legitimacy and access to broader financial systems [1]. A national trust bank charter, while distinct from a traditional commercial bank license, would enable Paxos to manage crypto assets under federal oversight and potentially integrate more seamlessly into the U.S. financial infrastructure.

Analysts note that a successful outcome would significantly elevate Paxos’s market position by allowing it to access federal payment systems and reduce the complexity of operating under state-specific regulations. However, the process remains uncertain, with regulatory approval subject to the broader political and economic climate. The company faces challenges not only from the approval process itself but also from potential opposition from legacy financial institutions exploring similar opportunities [3].

Paxos’s strategy underscores a broader industry trend of digital asset firms seeking traditional banking credentials to bridge the gap between emerging technologies and established financial systems. With federal oversight becoming increasingly feasible, the firm’s success in obtaining a national charter could set a precedent for other stablecoin issuers seeking to align with evolving regulatory expectations [2].