This week, Paxos submitted an application to the U.S. Office of the Comptroller of the Currency (OCC) for a national Trust Bank charter. If granted this national charter, Paxos will become the first custodian of digital assets to be regulated at both the state and federal levels.
We’re excited about the benefits a national Trust Bank charter can bring to our business, operations and customer service. Our mission is to modernize financial market infrastructure and enable the movement of any asset, any time, in a trustworthy way. A national Trust Bank charter would help us realize our goal by enabling us to serve customers across the country in the most efficient way.
Today, Paxos is regulated by the New York State Department of Financial Services (NYDFS) as a Trust company, and Paxos is committed to maintaining its NYDFS Trust charter. Headquartered in New York, we’ve been fortunate to have a pioneering regulator like the NYDFS in our own backyard. Paxos has always embraced a regulation-first approach, and together with the NYDFS, we set the industry standard for regulation in digital asset custody and management. The NYDFS has demonstrated time and again its commitment to making New York a hub of financial innovation:
- It was the first government agency to take clear and decisive action towards digital assets and has set a standard for all other regulators to follow.
- It was the first regulator to approve the issuance of a digital asset (Paxos Standard, in 2018).
- It was the first regulator to approve the issuance of an asset-backed token (PAX Gold, in 2019).
- It continues to reinvent digital asset regulation, for example with the advent of the virtual currency greenlist.
The NYDFS team’s support of innovation has enabled Paxos to continue to modernize financial market infrastructure, most recently by enabling our Crypto Brokerage partnership with PayPal through the approval of a conditional license. The Paxos New York trust company will continue to offer our Crypto Brokerage, partner with PayPal, run the itBit cryptocurrency exchange, issue NYDFS-regulated tokens Paxos Standard, BUSD, and PAX Gold, custody digital assets, and more. We have tremendous respect for the NYDFS and its commitment to this space, and we look forward to working closely with the NYDFS team into the future.
US law is organized at both a state and federal level. The national charter was designed expressly to allow banks to conduct business across state lines more easily. This flexibility allows a young company like Paxos to focus resources on building great products. A national Trust Bank charter provides us with flexibility to operate across the US while continuing to adhere to the highest regulatory standards.
For Paxos, it’s beneficial to hold trust charters from both the preeminent state (NYDFS) and national (OCC) banking regulators. This will further support our approach to innovation within regulation and drive important long-term benefits for our clients.
It’s been said many times before, but it’s true: the regulation of digital assets is in the early innings. Conversations around digital assets between regulators and market participants are only increasing in frequency and depth, and Paxos enthusiastically supports principles-based regulation that encourages innovation and mitigates risk. As we grow, we’ll remain committed to engaging with state and federal regulators – as well as those around the world.