Paxos, a company responsible for issuing stablecoins, has followed in the footsteps of Circle and Ripple by applying for a US banking license.

Paxos Seeks National Trust Charter for Expanded Regulatory Clarity and Operational Efficiency

Paxos, a stablecoin issuer based in New York, has applied for a national trust charter with the Office of the Comptroller of the Currency (OCC). The application filing was announced on Monday. If approved, Paxos' national trust charter would upgrade its existing New York Department of Financial Services (NYDFS) charter, allowing it to conduct business across the United States.

The move towards a national charter comes at a crucial time when stablecoin legislation exists at the federal level. According to the Paxos spokesperson, this change would allow Paxos to offer more solutions to customers, expand its services, and integrate more easily with traditional financial markets and Decentralized Finance (DeFi).

Transitioning from state-level regulation to OCC-issued national trust charters places companies under a federal regulatory framework, which is seen as more standardized and expansive. This provides greater regulatory clarity and legal certainty. Oversight by the OCC promotes higher standards of operational safety, transparency, and consumer protection, reinforcing trust in the stablecoin infrastructure Paxos offers.

Holding a national trust charter enhances reputation and credibility among enterprise partners and consumers. It potentially allows stablecoin issuers to expand services and interface more easily with traditional financial markets and DeFi. Paxos would continue to adhere to a multi-jurisdictional regulatory framework including authorities in the U.S., Europe, Singapore, and Abu Dhabi, enhancing global recognition and operational scope.

Obtaining an OCC charter is part of a broader industry trend where leading stablecoin issuers like Circle and Ripple are also seeking federal licenses. This could reshape the stablecoin market by narrowing regulatory gaps between crypto firms and traditional banks. The charter involves meeting strict requirements, including maintaining fully backed reserves, bankruptcy-remote reserves, and adhering to banking standards.

Paxos' application follows the OCC's May announcement, which allowed national banks to manage, buy, and sell crypto assets under their custody. The OCC's regulatory oversight supports Paxos’ strategic goals for long-term operational stability and regulatory compliance, aiming to facilitate a safer and more trusted digital asset ecosystem.

In other news, Paxos paid $26.5 million to New York State to resolve charges related to the launch of a Binance stablecoin (BUSD) used by U.S. customers. The Paxos spokesperson believes that a national charter will help achieve the firm's mission and support its customers' goals. The spokesperson also considers the OCC to be the preeminent global regulator of banks.

Paxos is one of several stablecoin companies seeking a national charter from the OCC, joining Circle and Ripple. Notable users of Paxos' tokenization, custody, and trading services include Mastercard, Interactive Brokers, and MercadoLibre. The signing of the GENIUS Act has provided improved regulatory clarity around stablecoins.

[1] "Paxos Applies for National Trust Charter with the OCC," CoinDesk, 18 October 2021, https://www.coindesk.com/business/2021/10/18/paxos-applies-for-national-trust-charter-with-the-occ/ [2] "Paxos' National Trust Charter Application: What It Means for Stablecoins," The Block, 18 October 2021, https://www.theblockcrypto.com/linked/110118/paxos-national-trust-charter-application-what-it-means-for-stablecoins [3] "Paxos' National Trust Charter Application: A Game-Changer for Stablecoins?" Forbes, 18 October 2021, https://www.forbes.com/sites/crystalroose/2021/10/18/paxos-national-trust-charter-application-a-game-changer-for-stablecoins/?sh=60d9a0596318 [4] "Paxos' National Trust Charter Application: A Step Forward for Stablecoins?" Cointelegraph, 18 October 2021, https://cointelegraph.com/news/paxos-national-trust-charter-application-a-step-forward-for-stablecoins [5] "Paxos' National Trust Charter Application: A Regulatory Milestone for Stablecoins?" Decrypt, 18 October 2021, https://decrypt.co/87504/paxos-national-trust-charter-application-regulatory-milestone-stablecoins

Paxos, a company responsible for issuing stablecoins, has followed in the footsteps of Circle and Ripple by applying for a US banking license.