New York Regulators Probes Stablecoin Issuer, Paxos
[TL; DR]
The New York Department of Financial services (NYDFS) is investigating Paxos for possible operational irregularities.
NYDFS has not openly divulged the reasons for investigating Paxos.
Paxos has announced that it will discontinue the issuance of BUSD and end its partnership with Binance.
Crypto users can purchase USDT and other cryptocurrencies at Gate.io.
Introduction
The implosion of FTX and other crypto projects such as Terra USD and BlockFi has pressured various governments to institute crypto regulations. Already, we have seen Britain and the United States taking the lead. Currently, New York Regulators are probing Paxos Company, the issuer of the stablecoins Binance USD (BUSD) and USDP.
The Reason why the New York Regulators are probing Paxos Company
The New York Department of Financial services (NYDFS) is investigating Paxos Company, the issuer of stablecoins Paxos Dollar (USDP) and Binance USD (BUSD). The exact cause of the investigation is not truly known, although there are speculations that it is because of its partnership with Binance relating to BUSD.
However, the NYDFS’ underlying motive for the probe is to protect the consumers from the risks emanating from their investment in cryptocurrencies. As background information, Paxos Company is the issuer of two prominent stablecoins namely BUSD and USDP.
The NYDFS spokesman said, “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.”
New York Regulators investigate Paxos - Cryptotvplus
By the way, Paxos is one of the leading regulated companies in the United States. In addition, it has a vibrant blockchain infrastructure platform and an open and efficient financial . Its technology enables transparent settlement of transactions, trading and tokenization of assets.
In 2019 Paxos partnered with Binance to develop BUSD, the third largest stablecoin based on market capitalization. On the other hand, Paxos Dollar (USDP) is the sixth largest stablecoin. Apart from these, it has a Paxos crypto backed by gold called PAX Gold (PAXG) that exists on the Ethereum blockchain.
Recently, the Securities and Exchange Commission issued a notice of its intention to prosecute Paxos called a Wells notice. A reliable source has said that the NYDFS alleges that Paxos Company has issued and listed an unregistered security, BUSD.
Paxos’ Reverses for BUSD and USDP
Generally, Paxos has done much to protect the users through maintaining reserves for its stablecoins. Since 2022, Paxos has maintained that it has full reserves for its two stablecoins, BUSD and USDP. It has even gone to the extent of declaring on its website that its reserves are in United States dollars and US treasuries.
Notably, Paxos announced in 2022 that it would constantly give updates on its reserves in order to create trust and confidence in its customers. In this respect, it gives a monthly report on its reserves. The purpose of these reports is to show how transparent the company is in securing its stablecoins.
Settlement between Paxos and the New York Department of Financial Services
The latest report shows that Paxos has reached a settlement with the New York Department of Financial Services over the allegations levelled against it. To this effect, Paxos Company recently announced that it will stop issuing BUSD with effect from 21 February. It has also stated that it will end its current partnership with Binance.
In fact, the New York Department of Financial Services forced Paxos to stop the issuance of BUSD with immediate effect. This development shows the bad relationship that exists between Binance and United States regulators. As you may know, Binance has been under surveillance since 2021 due to compliance issues with U.S. anti-money laundering rules.
However, the Binance CEO, Changpeng Zhao, reassured its users through Twitter that their funds in BUSD are safe and that they can continue to redeem it at any time. Likewise, the NYDFS said that it will continue to monitor Paxos to ensure that the consumers cash out on BUSD.
Read also: Markets Brace for US Inflation Data Release and SEC Crackdown on Stablecoins
Paxos and iBit
Apart from its coveted BitLicense, obtained from NYDFS, Paxos owns iBit, a reliable and leading cryptocurrency exchange based in the United States. In fact the BitLicense allows Paxos to carry out digital related activities in New York State. Launched in 2012, the itBit Digital Asset Exchange also has offices in London and Singapore. Apart from iBit there are other cryptocurrency exchanges such as Gate.io that offer different digital products.
Gate.io crypto exchange
Gate.io has over 1 400 pairs of cryptocurrencies as well as different non-fungible tokens.
You can trade various cryptocurrencies such as USDT, the number one stablecoin by market capitalization. In fact, USDT is one of the cryptocurrencies that has many pairs. You can exchange USDT for BTC, TRX, ADA, MATIC, ETH and many more.
The good thing is that you can use a credit card to purchase USDT and convert it to other tokens and coins. To buy USDT using credit card or wire transfer you click on “Buy Crypto” and select a payment method.
Conclusion
To sum up, the New York Department of Financial services (NYDFS) is investigating Paxos Company to find if it is complying with the relevant crypto regulation. Already, Paxos announced that it will stop issuing BUSD with effect from 21 February 2023. Aside from BUSD, Paxos has other tokens namely Paxos Dollar (USDP), USDP and PAX Gold (PAXG).
FAQs on Paxos
What is Paxos Trust Company?
Paxos Trust Company is a United States based regulated issuer of Binance USD, Paxos Dollar (USDP) and PAX Gold (PAXG). It also owns iBit, a cryptocurrency exchange registered in the United States, with other offices in London and Singapore.
Why has Paxos issued BUSD?
Paxos Trust Company partnered with Binance to issue Binance USD (BUSD). BUSD is a stablecoin that is pegged 1.1 with the United States dollar and is traded on many cryptocurrency exchanges.
