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Stablecoin Issuer Paxos Is Being Investigated by New York Regulator

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The New York Department of Financial Services (NYDFS) is investigating stablecoin issuer Paxos, CoinDesk has learned.

The full scope of the investigation is unclear. Paxos’ stablecoins include the Pax dollar (USDP) and Binance USD (BUSD), a Binance-branded stablecoin offered through a white-label service.

A NYDFS spokesperson said the agency could not comment on ongoing investigations.

Paxos has been in the news recently over rumors the U.S. Office of the Comptroller of the Currency – a federal bank regulator – may ask it to withdraw its application for a full banking charter. Paxos has denied these rumors.

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However, an ongoing investigation by a state regulator suggests the company, which received a provisional bank charter from the OCC in 2021, is indeed under closer scrutiny than its peers may be.

Paxos also holds a virtual currency license – commonly referred to as BitLicenses – issued by NYDFS.

A Paxos spokesperson did not return a request for comment by press time.

NYDFS published stablecoin guidance in June, directing issuers to ensure their stablecoins be fully backed with assets segregated from the issuers’ funds and attested to regularly.

The guidance, which was issued in the wake of the collapse of the terraUSD/luna stablecoin ecosystem, is focused on asset-backed stablecoins. NYDFS had been working on the guidance since prior to the collapse, Superintendent Adrienne Harris told CoinDesk at the time.