Paxos Resubmits U.S. National Trust Bank Charter Application Amid Regulatory Shifts

Paxos Trust Company, the firm behind PayPal’s PYUSD stablecoin, has resubmitted its application to the U.S. Office of the Comptroller of the Currency (OCC) for a national trust bank charter, seeking renewed federal regulatory recognition. This marks a revival of its stalled 2020–2023 effort, during which the firm had received preliminary conditional approval, but was unable to complete the process before the 18-month window expired on March 31, 2023 [1]. The application seeks to convert Paxos’ New York limited-purpose trust charter into a full federal one, which would allow it to custody assets and settle payments nationwide under a single regulatory framework [2].

The renewed filing follows the enactment of the GENIUS Act, the first federal legislative framework for stablecoin issuers, which prohibits yield-bearing stablecoins and is expected to influence capital flows into tokenized assets [3]. Industry experts suggest that this regulatory development may drive institutional investors toward compliant, yield-generating options in the digital asset space, as interest in tokenization continues to grow. Paxos CEO Charles Cascarilla has stated that federal oversight will reinforce the company’s commitment to safety and transparency [4].

Paxos’ push for a national charter also comes in the wake of a $48.5 million settlement with the New York Department of Financial Services (NYDFS) over alleged anti-money laundering compliance failures related to its former partnership with Binance. The settlement included a $26.5 million fine and a $22 million investment in compliance enhancements [5]. The firm has since operated under its New York-based trust charter, but has expressed a long-standing interest in transitioning to federal oversight when the regulatory environment became more favorable.

The application aligns with broader trends in the crypto industry, as other stablecoin issuers like Circle and Ripple have also filed similar petitions with the OCC. However, the process remains complex and contentious, with some traditional banking groups expressing concerns over the lack of deposit-taking and lending activities in these charter applications [6]. To date, only Anchorage Digital has received a conditional national trust bank charter, though it has faced regulatory scrutiny.

Paxos has built a strong compliance profile across multiple jurisdictions, including oversight from Singapore’s Monetary Authority of Singapore (MAS), the European Financial Supervisory Authority (FIN-FSA), and the Abu Dhabi Financial Services Regulatory Authority (FSRA). This international regulatory footprint is intended to support its bid for a U.S. national charter and demonstrate its capacity to operate under stringent compliance standards [7].

The outcome of Paxos’ application could set a significant precedent for the integration of blockchain technology into the U.S. financial system. If granted, the charter would position Paxos as one of the few blockchain-native entities with full federal banking status, enhancing its appeal to institutional clients and further legitimizing the crypto industry’s infrastructure [8].

Sources:

[1] Cointelegraph (https://cointelegraph.com/news/paxos-us-bank-license-stablecoin-rules)

[2] AInvest (https://www.ainvest.com/news/paxos-renews-bid-federal-trust-bank-charter-regulatory-shifts-2508/)

[3] Cryptonews (https://cryptonews.com/news/trumps-crypto-empire-makes-1-5b-bet-on-its-own-wlfi-token/)

[4] Blockonomi (https://blockonomi.com/paxos-renews-high-stakes-bid-for-national-trust-bank-status-in-u-s/)

[5] Coindoo (https://coindoo.com/paypals-stablecoin-issuer-seeks-national-trust-bank-status/)

[6] AInvest (https://www.ainvest.com/news/paxos-resubmits-trust-charter-application-regulatory-clarity-push-2508/)

[7] CoinMarketCap (https://coinmarketcap.com/community/articles/689ad3a4f48bf17820639fcf/)

[8] World Economic Forum (https://www.weforum.org/agenda/2023/tokenization/)