Paxos Seeks US National Trust Bank Charter Again

Paxos Pursues National Trust Bank Charter

Paxos Trust Company, known for its role in PayPal’s PYUSD stablecoin, has re-submitted its application to convert its New York limited-purpose trust charter into a US national trust bank charter. The initial application lapsed in 2023.

The federal charter, granted by the Office of the Comptroller of the Currency (OCC), would enable Paxos to custody customer assets and process payments nationwide under federal regulation. This could enhance its attractiveness to institutional clients. It's important to note that unlike traditional banks, a national trust bank cannot accept cash deposits or issue loans.

“OCC oversight will reinforce our long-standing commitment to upholding the highest standards of safety and transparency,” stated Paxos co-founder and CEO Charles Cascarilla.

Background on Paxos' Charter Application

Paxos initially sought the charter in December 2020 and received conditional approval from the OCC in April 2021. This allowed Paxos to begin fulfilling pre-opening requirements, including meeting capital, compliance, and operational benchmarks.

However, OCC rules stipulate that conditional approvals expire after 18 months if the bank is not operational, unless an extension is granted. Paxos’s initial approval lapsed on March 31, 2023.

Paxos has operated under its New York limited-purpose trust charter since 2015, affirming its commitment to federal oversight when conditions allowed.

Challenges and Regulatory Landscape

While Paxos did not specify why its first charter application expired, the company faced increasing regulatory pressures.

Key developments:

• In February 2023, the New York Department of Financial Services (NYDFS) directed Paxos to cease issuing Binance USD (BUSD) due to compliance concerns, intensifying scrutiny and ending its partnership with Binance.
• Recently, the NYDFS reached a $48.5 million settlement with Paxos regarding alleged anti-money laundering failures in its Binance partnership.
• Paxos will pay a $26.5 million fine to New York State and allocate an additional $22 million to improve its compliance program.

Paxos' renewed application follows the GENIUS Act, which established a federal framework for stablecoin issuers. Other stablecoin issuers, like Ripple and Circle, have also recently pursued charter applications.