The New York Department of Financial Services (NYDFS) is reportedly investigating stablecoin issuer Paxos. Although the exact scope of the investigation remains unclear, NYDFS’s decision to look into Paxos suggests that the company is under closer scrutiny compared to its peers.
Paxos, which holds a virtual currency license (BitLicense) issued by NYDFS, is known for its Pax dollar (USDP) and Binance USD (BUSD), a Binance-branded stablecoin offered through a white-label service. The NYDFS declined to comment on the ongoing investigation.
Recently, rumors had circulated that the U.S. Office of the Comptroller of the Currency (OCC) may ask Paxos to withdraw its application for a full banking charter. Paxos has denied these rumors. However, the ongoing investigation by a state regulator implies that Paxos is indeed under closer scrutiny than its peers.
Stablecoin Guidance by NYDFS
NYDFS published stablecoin guidance in June 2021, directing issuers to ensure that their stablecoins are fully backed by assets segregated from the issuer’s funds and attested to regularly. This guidance was issued after the collapse of the TerraUSD/Luna stablecoin ecosystem and was focused on asset-backed stablecoins.
Paxos has not yet commented on the ongoing investigation by NYDFS. The company, which received a provisional bank charter from the OCC in 2021, holds a virtual currency license issued by NYDFS and is known for its Pax Dollar and Binance USD stablecoins. With the NYDFS’s stablecoin guidelines in place, issuers must make sure that their stablecoins are stable and safe.
This story originally appeared on bloomberg
