Paxos Seeks National Banking License After $48.5M Settlement with New York Regulators

• Paxos applied for a national banking license with the OCC and joins Circle and Ripple in seeking federal oversight.

• The firm settled with New York regulators for $48.5 million over compliance failures related to Binance monitoring.

• Customer funds remain secure with 1:1 backing, and the transition will not interrupt services.

Paxos has applied for a national banking license with the Office of the Comptroller of the Currency (OCC), marking the latest move by a major stablecoin issuer to secure federal regulatory approval. The crypto firm joins Circle and Ripple in pursuing national trust charters as the industry pushes for greater regulatory clarity.

The application comes shortly after Paxos reached a $48.5 million settlement with New York’s Department of Financial Services (NYDFS) over anti-money laundering compliance failures. The firm will convert its existing NYDFS trust charter into a national trust charter, placing operations under federal oversight.

Federal Oversight Transition Marks Strategic Shift

Paxos announced the charter conversion represents a commitment to maintaining the highest regulatory standards across its blockchain infrastructure and tokenization platform. The firm operates under regulatory oversight in Europe, Singapore, and Abu Dhabi markets.

The national trust charter application positions Paxos alongside fellow stablecoin issuers Circle and Ripple, who submitted similar applications over a month ago. Ripple’s application recently became public as part of the standard approval process, though crypto firms have faced resistance from traditional banking associations.

The American Bankers Association and Independent Community Bankers of America have opposed crypto firms’ banking license applications, citing concerns about digital asset risks in the traditional banking system.

Paxos agreed to pay $26.5 million in civil penalties and invest $22 million in compliance program upgrades to resolve NYDFS charges. The settlement addresses failures to monitor illegal activity connected to crypto exchange Binance, where Paxos served as the issuer of the BUSD stablecoin.

The NYDFS ordered Paxos to cease BUSD issuance following the compliance investigation in February. The firm confirmed it has “fully remediated” the identified compliance issues and emphasized that customer accounts remained unaffected throughout the process.

Paxos assured customers that its issued assets will continue operating with 1:1 redemption backing through bankruptcy-remote reserves in U.S. dollars, Treasuries, and cash equivalents. The firm expects seamless service continuation during the federal charter transition.

Crypto Banking Consolidation Accelerates

The banking license applications signal a broader consolidation trend as major crypto firms seek traditional financial regulatory frameworks. National trust charters provide federal oversight that could streamline operations across state jurisdictions while offering greater regulatory certainty.

Paxos emphasized that the OCC charter reinforces its commitment to global safety and transparency standards. The firm maintains that federal oversight will strengthen its regulated blockchain infrastructure provider position while preserving its existing international regulatory relationships.

The outcome of these banking license applications could establish precedents for how traditional banking regulators approach crypto firm oversight and integration into the broader financial system.