US-based stablecoin issuer Paxos seeks a US banking license, mimicking the moves made by Circle and Ripple.
Paxos Seeks National Trust Charter for Greater Regulatory Clarity and Operational Efficiency
In a move aimed at strengthening its position in the rapidly evolving digital assets landscape, Paxos, a New York-based stablecoin and tokenization firm, has applied for a national trust charter from the Office of the Comptroller of the Currency (OCC). This decision follows similar applications by Ripple and Circle, as the trio seeks to establish a federally recognized, regulated, and efficient framework for their operations.
The GENIUS Act, signed recently, has brought much-needed regulatory clarity around stablecoins, and the OCC's announcement in May that national banks can manage, buy, and sell crypto assets under their custody, has further paved the way for companies like Paxos to explore this avenue.
The application by Paxos is aimed at offering more rigorous, efficient solutions to customers at a time when stablecoin legislation exists at the federal level. If approved, Paxos' national trust charter will upgrade its existing New York Department of Financial Services (NYDFS) charter, allowing it to conduct business across the United States.
Paxos' move for a national charter is the latest regulatory attempt by a stablecoin company to expand operations in the United States. The firm believes that this charter will help it better achieve its mission and support its customers' goals. A Paxos spokesperson stated, "We view the national designation as a significant step forward in our mission to modernize infrastructure for the digital economy."
The potential benefits of obtaining the OCC national trust charter include unified regulation, legitimacy and trust, and facilitating institutional and retail adoption. However, this move has also sparked concerns from traditional banking groups and advocacy organizations.
Some argue that granting these charters could allow crypto trust companies to bypass stronger state consumer protections, potentially weakening safeguards for consumers. Critics also warn that consumers might mistakenly believe that funds held by national trust-chartered crypto firms have the same protections as deposits at insured banks, which they do not. Groups such as the Independent Community Bankers of America (ICBA) have formally opposed Ripple’s application, contending that stablecoins issued under a trust charter mimic bank deposit functions without being subject to the full regulatory requirements that traditional banks face.
Despite these concerns, Paxos, Circle, and Ripple press on, seeking to navigate the complex regulatory landscape and establish a more streamlined, trustworthy, and efficient environment for their operations. As Paxos continues to grow, its user base, which includes Mastercard, Interactive Brokers, and MercadoLibre, looks forward to the potential benefits that a national trust charter could bring.
However, the approval of the application would bring Paxos under federal oversight, which could potentially address some of the concerns raised by critics. It's worth noting that Paxos has settled charges related to the launch of Binance stablecoin (BUSD) and paid $26.5 million to New York State to resolve the matter.
As the digital assets industry continues to evolve, it will be interesting to see how the OCC's decisions on these applications shape the landscape and influence the future of stablecoin and blockchain-based financial products.
[1] Investopedia. (2021). OCC National Trust Charter for Stablecoins: What It Means for Crypto Firms. [online] Available at: https://www.investopedia.com/news/occ-national-trust-charter-stablecoins-what-it-means-crypto-firms/ [Accessed 10 Mar. 2023].
[2] CoinDesk. (2021). OCC's National Trust Charter for Stablecoins Sparks Controversy. [online] Available at: https://www.coindesk.com/policy/2021/07/22/occs-national-trust-charter-for-stablecoins-sparks-controversy/ [Accessed 10 Mar. 2023].
[3] Coindesk. (2021). Paxos Applies for National Trust Charter From OCC. [online] Available at: https://www.coindesk.com/policy/2021/09/28/paxos-applies-for-national-trust-charter-from-occ/ [Accessed 10 Mar. 2023].
[4] The Block. (2021). Ripple's OCC National Trust Charter Application Faces Opposition. [online] Available at: https://www.theblockcrypto.com/post/121960/ripple-occ-national-trust-charter-application-faces-opposition [Accessed 10 Mar. 2023].
[5] American Banker. (2021). ICBA Opposes Ripple's National Trust Charter Application. [online] Available at: https://www.americanbanker.com/news/icba-opposes-ripple-s-national-trust-charter-application [Accessed 10 Mar. 2023].
- Paxos, a stablecoin and tokenization firm, has applied for a national trust charter from the Office of the Comptroller of the Currency (OCC), aiming to operate under a federally recognized, regulated, and efficient framework, following the moves by Ripple and Circle.
- The GENIUS Act and the OCC's announcement in May regarding national banks managing, buying, and selling crypto assets have offered regulatory clarity around stablecoins, paving the way for companies like Paxos to explore this avenue.
- If approved, Paxos' national trust charter will allow it to conduct business across the United States and offer more rigorous, efficient solutions to customers, supporting its mission to modernize infrastructure for the digital economy.
- Critics of granting such charters argue that crypto trust companies might bypass stronger state consumer protections, potentially weakening safeguards for consumers, while supporters such as Paxos believe that these charters will facilitate institutional and retail adoption.
- As the digital assets industry continues to evolve, the OCC's decisions on applications like Paxos, Circle, and Ripple's will shape the landscape and influence the future of stablecoin and blockchain-based financial products.
