Stablecoin issuer Paxos is under investigation by regulator

The New York Department of Financial Services (NYDFS), a US financial regulator, is currently targeting stablecoin issuer Paxos. The exact reason for the investigation is currently unclear, but Paxos is, among other things, the issuer of the Pax dollar (USDP) and the Binance USD (BUSD), a stablecoin with the Binance brand attached. CoinDesk was the first to report the news.

No comment from Paxos

A NYDFS spokesperson declined to comment to CoinDesk about the ongoing investigation into Paxos. In any case, the company recently made headlines over rumors of a decision by the US Office of the Comptroller of the Currency (OCC) that Paxos should withdraw its application for a full banking license.

Paxos denies these rumors, but the NYDFS’s investigation suggests there may be more going on at the stablecoin issuer. In any case, the company is under more scrutiny than some of its competitors.

It may have something to do with Binance’s stablecoin. After all, we know that most Western legislators are not very happy with the way Changpeng Zhao’s exchange platform operates. Binance is a fairly opaque organization that provides little insight into its financial situation and way of operating.

Fully covered?

In June of last year, the NYDFS published guidelines for stablecoin issuers. It states, among other things, that issuers must ensure that their stablecoins are fully backed by assets of the fund and that they must regularly prove that those assets are actually present and fully within their control.

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These guidelines were published following the collapse of the Terra (LUNA) ecosystem. Terra’s implosion finally began after the project’s TerraUSD (UST) stablecoin lost its peg to the dollar. Subsequently, the LUNA token also fell, after which more than $ 45 billion in assets went up in smoke.

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