This week, a blog post created some confusion around how Paxos approaches sanctions and the recent market activity around Tornado Cash. We’d like to provide some clarity. 

Paxos is a regulated trust company and has built a rigorous culture of compliance. We remain fully committed to compliance with OFAC sanctions, including those levied on Tornado Cash. We recognize the important role that the financial community plays in implementing these sanctions, and are taking all appropriate measures to ensure adherence to the new restrictions.

Per publicly available information via open-sourced block explorers and analytics platforms, it is known that Paxos-minted tokens USDP, BUSD, and PAXG were and are not supported by Tornado Cash. Additionally,  Paxos-issued tokens USDP, BUSD and PAXG were and are not in any of the sanctioned wallet addresses. Therefore, Paxos-issued assets were not subject to freezing in the same way as other minted tokens at the time of Tornado Cash’s designation by OFAC. 

Paxos maintains a risk-based approach to comply with all sanctions regulations to which it is subject, with oversight from the New York Department of Financial Services. This includes utilizing blockchain analytics to conduct real-time monitoring, reviewing potential sanctions exposures, and taking appropriate actions to mitigate any risks, in line with regulatory expectations. Paxos is constantly evaluating its controls to ensure that any potential illicit behavior is prohibited.

Kate Eyerman is Paxos’ BSA/AML & Sanctions Officer