Paxos pursues Trust Charter from the Office of the Comptroller of the Currency (OCC)
Paxos Seeks National Trust Bank Charter Under OCC Supervision
Paxos, a leading crypto firm, has applied to convert its existing New York Department of Financial Services (NYDFS) limited-purpose trust charter into a national trust bank charter under the U.S. Office of the Comptroller of the Currency (OCC). This move, if approved, would place Paxos under federal oversight by the OCC across all 50 U.S. states.
The timing for this application is considered advantageous, as the federal government has passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) in 2021, and the regulatory landscape is favourable under the present administration. The OCC's pro-crypto stance, with all signals being green on the federal side, has also contributed to this decision.
If approved, the national trust bank charter would allow Paxos to custody customer assets, offer payment processing nationwide, and operate under the highest regulatory standards. However, unlike a traditional full-service bank charter, it does not allow Paxos to accept cash deposits from the public or offer lending or traditional banking loans. This status aligns it more with a specialized financial institution focused on asset custody and fiduciary services, rather than a conventional bank engaging in deposit-taking and lending activities.
Paxos intends this charter upgrade to reinforce its commitment to safety, transparency, and regulatory compliance in its blockchain and tokenization platform services. The OCC oversight is seen by Paxos as providing "the highest level of regulatory oversight," which could enhance customer trust and facilitate greater institutional adoption of its services.
The move to federal OCC supervision aligns with a broader trend of crypto companies seeking more consistent and standardized oversight. Paxos maintains a regulatory framework beyond the U.S., including financial regulators in Europe, Singapore, and Abu Dhabi, enhancing its global operational compliance. If approved, Paxos would maintain a multi-jurisdictional regulatory framework including the OCC in the U.S., FIN-FSA in Europe, MAS in Singapore, and FSRA in Abu Dhabi.
It's important to note that Paxos has faced regulatory challenges in the past. In 2023, the NYDFS ordered the firm to stop issuing new Binance USD stablecoins, following a case against Paxos. The firm was also fined $26.5 million by the NYDFS for due diligence failures related to its relationship with former partner Binance and systemic shortcomings in Paxos' anti-money laundering program. However, the settlement resolves this case, and Paxos is required to invest an additional $22 million in its compliance program, as per the NYDFS.
Paxos is not alone in seeking a national trust bank charter. Other crypto firms like Circle, Ripple, and Fidelity Digital Assets have also applied for this charter. Anchorage was the first crypto firm to receive a charter for Anchorage Digital Bank by the OCC in 2021.
In summary, Paxos' application for a national trust bank charter under the OCC's supervision reflects a strategic move to strengthen its regulatory compliance and operational reach, while maintaining its focus on blockchain infrastructure and stablecoins. If approved, this charter would provide Paxos with significant business advantages, including nationwide regulatory consistency and the ability to custody customer assets and offer payment processing.
References:
- Paxos Applies for National Trust Bank Charter
- Paxos Seeks National Trust Bank Charter to Boost Compliance
- Paxos Faces Regulatory Challenges but Pushes for National Trust Bank Charter
- OCC Signals Pro-Crypto Stance with Expanded Crypto Activities for National Banks
- Paxos' National Trust Bank Charter: What It Means and Why It Matters
- The move by Paxos to seek a national trust bank charter under OCC supervision signifies a significant embrace of technology-oriented regulatory frameworks, aiming to boost compliance and enhance its operational reach.
- With the OCC oversight, Paxos hopes to tap into the potential of technology to improve customer trust, facilitate greater institutional adoption, and operate under the highest regulatory standards, positioning itself as a leader in the blockchain and tokenization sector.
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