The New York Department of Financial Services (NYDFS) is reportedly looking into Paxos Trust Company, the stablecoin issuer responsible for Binance USD (BUSD) and Paxos Dollar (USDP), although, the reason for the investigation hasn’t been revealed.
According to a Feb. 10 report by Bloomberg, “a source familiar with the situation,” the investigation’s precise purpose is still up in the air.
The NYDFS is actively attempting to safeguard consumers from the hazards involved with investing in the cryptocurrency market, according to a department representative who refused to comment on current investigations.
“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.”
Since the company partnered with Binance in September 2019, Paxos has released BUSD, a stablecoin backed by U.S. Dollars. With a market valuation that is now around $16 billion, it is the third-largest stablecoin.
It is also the innovator of the 2018-released Paxos Dollar (USDP). According to CoinGecko, it is now the sixth biggest stablecoin with a market worth of roughly $875 billion. It is also the creator of PAX Gold (PAXG), an Ethereum token backed by gold. The business founded Paxos in 2012 and is also responsible for the digital asset exchange itBit.
Paxos received a “BitLicense” from the NYDFS in 2015, allowing businesses to lawfully engage in operations relating to digital currency in the state of New York.
Despite the company just gaining preliminary permission in April 2021, Paxos recently denied allegations that the U.S. Office of the Comptroller of the Currency (OCC) may require Paxos to withdraw its application for its full banking license.
Additionally, according to Paxos’ website, the BUSD and USDP token reserves are fully backed by U.S. dollars and U.S. Treasury bonds.
The NYDFS has launched many investigations over the last year if allegations of this one are accurate.
On January 4, Coinbase Global U.S. and the New York regulator agreed to a $100 million settlement after discovering that they had overlooked around 100,000 questionable transactions made by users who had created accounts without doing adequate background checks.
The Terra LUNA ecosystem and its failing algorithmic stablecoin TerraClassicUSD (USTC) imploded in May 2022, and soon after, the NYDFS released a stablecoin guideline report to make sure stablecoin issuers adequately backed their assets and routinely attested.
