Paxos Trust Company, the crypto infrastructure company behind PayPal’s PYUSD stablecoin, has filed to convert its New York limited-purpose trust charter into a US national trust bank charter, renewing an effort that expired in 2023.

If approved, the federal charter, issued by the Office of the Comptroller of the Currency (OCC), would allow Paxos to custody customer assets and settle payments nationwide under federal oversight, potentially boosting its appeal to institutional clients. Unlike traditional banks, a national trust bank cannot accept cash deposits or issue loans.

“OCC oversight will help build on our historic commitment to maintaining the highest standards of safety and transparency," Paxos co-founder and CEO Charles Cascarilla said in a statement.

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Paxos’ 2021 federal charter approval expired before launch

Paxos first applied for a the charter in December 2020 and received preliminary conditional approval from the OCC in April 2021. The green light allowed the company to begin meeting a series of pre-opening requirements, including capital, compliance and operational benchmarks.

However, under OCC rules, conditional approvals expire if the bank is not opened within 18 months, unless extended. Paxos’s approval lapsed on March 31, 2023.

During that period, Paxos continued operating under its New York limited-purpose trust charter, which it has held since 2015. At the time, the company said it remained committed to pursuing federal oversight when conditions were right.

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Regulatory setbacks and Binance-linked penalties

Paxos didn’t say why its first charter with the OCC expired, but regulatory pressure was mounting at the time. 

In February 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing Binance USD over compliance concerns, putting the company under heightened scrutiny and forcing it to end its relationship with Binance.

That scrutiny culminated last week, when the NYDFS reached a $48.5 million settlement with Paxos over its alleged failure to uphold anti-money laundering provisions in its partnership with Binance.

According to an announcement on Thursday, Paxos will pay the state of New York a $26.5 million fine, and allocate another $22 million toward upgrading its compliance program.

Paxos’ renewed bid comes just weeks after the GENIUS Act established the first federal framework for stablecoin issuers. It also follows a wave of recent charter applications from other stablecoin issuers, including Ripple and Circle.

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