Binance's stablecoin partner Paxos Standard is the subject of an investigation by the New York State Department of Financial Services (NYDFS), marking a further escalation in the regulatory climate surrounding crypto currencies in the United States (NYDFS).
Paxos Standard is Being Investigated by the State of New York's Regulator
Bloomberg cites (1) a source familiar with the situation as saying that the New York Department of Financial Services had recently begun investigating Paxos.
However, the precise nature of the investigation's scope has yet to be entirely understood. In addition to BUSD, Paxos also makes available on the market its native stablecoin known as the Pax Dollar.
A spokesperson for the New York Department of Financial Services stated that he is unable to remark on the inquiry but decided to add that the agency is in constant communication with regulatory agencies to comprehend the risks and vulnerabilities to customers and the organizations themselves from the volatile crypto currency market that we are currently experiencing.
Paxos Trust Co. is a business overseen by the NYDPS since it is considered a regulated firm. In addition, the firm's website emphasizes customers' safety and states that the reserve for both of the stablecoins it creates is wholly held in cash and treasuries of the United States.
Stablecoins, as we are aware, are digital assets tethered to fiat currencies such as the United States dollar. Equal reserves of other assets, such as cash and bonds, support these digital assets.
Stablecoins have been at the center of several different disputes, though, because of the failures and blowups that occurred in the past. The failure of the TerraUSD stablecoin that occurred in 2017 compelled regulatory agencies to conduct a more in-depth review of the stablecoins sector.
Paxos manages the BUSD stablecoin, which is presently the world's third-largest stablecoin and has a market valuation of $16 billion. This is accomplished through strategic cooperation with Binance.
Paxos Dollars, the company's native stablecoin, now has a market value of $859 million.
Binance Gives Its Opinion on the Most Recent Development
Binance, which is a Paxos partner, is keeping a close eye on the events surrounding the investigation being conducted by NYDFS against Paxos Trust Co. Binance said in a statement that it will continue to monitor the issue and added that "BUSD is a 1-to-1 backed stablecoin that is among the most honest stablecoins that currently exists."
The Department of Financial Services for the State of New York is widely recognized as one of the most stringent regulators in the United States.
Crypto service providers must get a BitLicense, which includes being subject to regulatory scrutiny. Paxos was awarded a charter as a limited-purpose trust business by a New York state regulator in 2015.
The NYDFS has maintained a vigilant watch over all crypto currency businesses operating inside its boundaries.
Coinbase has agreed to pay the regulator a settlement fee of $100 million for allowing clients to register accounts with inadequate background checks. The settlement was reached in January.