Paxos Trust Company LLC (“Paxos Trust”) is a regulated financial institution with a primary prudential regulator, which means that every aspect of our operations – from our product design to our corporate governance to our customer support – is supervised by the New York State Department of Financial Services (NYDFS). Paxos secured a limited purpose Trust charter from NYDFS in 2015 because we wanted to be the indisputable safest institution for digital assets.
Our mission is to get every asset on the blockchain, which will create a more stable and transparent financial system that’s more accessible to the people who need it most. To get there, we have to build mainstream and institutional adoption of blockchain; we’re working toward those goals by building trust in Paxos as an institution. A crucial part of building that trust is our relationship with our primary prudential regulator, which is the premier state-level regulator in the United States. It is on the cutting edge of digital asset regulation and oversight. But as a limited purpose Trust, there are certain things Paxos Trust CAN and CANNOT do.
What Paxos Trust CAN Do:
Paxos Trust can offer a layer of protection for consumers that few others in the digital assets space can offer – it holds all customer assets bankruptcy remote. Paxos Trust is different from an ordinary LLC. In addition to being regulated by NYDFS, it is subject to New York Banking Law. That law states in the unlikely event that Paxos Trust became insolvent, it would not go through standard bankruptcy procedures like other companies. Instead, the Superintendent of NYDFS would return assets held in custody by Paxos Trust to their rightful owners, as reflected on our books and records. As a qualified custodian, Paxos Trust holds customer assets safely separate from any corporate funds. This way, our customers always know that their assets are always there and always in their name.
What Paxos Trust CANNOT Do:
In recent statements, SEC Chair Gary Gensler called out high-profile exchanges that earn most of their revenue by trading in principal against their customers. That is a zero sum game: what the exchanges gain, their customers lose. Unlike our competitors, as a regulated Trust, Paxos Trust cannot and does not profit from principal trading against our customers. This ensures our interests are aligned with customers.
Protection of customer assets has been central to Paxos’ mission since our founding, which is why we have pursued the highest regulatory oversight within the crypto space both with the NYDFS and soon with the Office of Comptroller of the Currency (OCC). We are an institution that asks for permission instead of begging for forgiveness. This is fundamental to all aspects of Paxos. As our US General Counsel Dan Burstein has said, “Trustworthiness is critical to our business success at Paxos. We believe that by becoming a trusted, regulated, audited infrastructure provider, we can offer the highest levels of safety, protection and security for our clients.”