By
Steve Muchoki
April 24th, 2024
Binance said that it’s closely watching the developments of a probable investigation of Paxos Trust Co.
In another regulatory escalation in the crypto landscape of the United States, Binance’s stablecoin partner Paxos Standard faces an investigation from the New York State Department of Financial Services (NYDFS).
Paxos Staandard Probed by New York Regulator
A person familiar with the matter told Bloomberg that NYDFS has recently started probing Paxos. However, the exact scope of the investigation isn’t still clear as of now. apart from BUSD, Paxos also has its own native stablecoin, the Pax Dollar in the market.
A spokesperson for NYDFS stated that he can’t comment on the investigation but added: “The department is in continuous contact with regulated entities to understand vulnerabilities and risks to consumers and the institutions themselves from crypto market volatility we are experiencing”.
Paxos Trust Co. works as a regulated entity under the New York State Department of Financial Services. Besides, the company’s website also stresses consumer protection and says that the reserves for both the stablecoins that it issues are entirely in cash and US treasuries.
As we know stablecoins are digital assets pegged to fiat currencies such as the US dollar. Underpinning these digital assets are the matching reserves of other assets like cash and bonds.
However, due to some past failures and blowups, stablecoins have been largely part of different controversies. Last year, the collapse of TerraUSD stablecoin forced regulators to have a deeper look at the stablecoins market.
In partnership with Binance, Paxos operates the BUSD stablecoin which is currently the world’s third-largest stablecoin with a market cap of $16 billion. Its native stablecoin Paxos Dollar has a market value of $859 million.
Binance Responds to the Latest Development
Being a Paxos partner, Binance is closely watching the developments with the investigation of Paxos Trust Co. by NYDFS. In a statement, Binance said that they will continue to monitor the situation adding that “BUSD is a 1-to-1 backed stablecoin that is one of the most transparent stablecoins in existence”.
The New York State Department of Financial Services is one of the strictest regulators currently in the US. It requires crypto service providers to secure BitLicense which comes along with regulatory oversight. Back in 2015, the New York regulator granted Paxos a limited-purpose trust company charter.
NYDFS has been keeping a close vigil on all crypto firms operating under its jurisdictions. Last month in January, the regulator reached a $100 million settlement with Coinbase for letting customers open accounts with insufficient background checks.