- Paxos seeks OCC national trust charter, joining Ripple and Circle in federal oversight bid.
- OCC charter application aims to enhance Paxos’s regulatory framework and asset management.
- This is Paxos’s second application to the Charter after its 2020 approval lapsed in 2023.
Paxos, a leader in blockchain infrastructure and tokenization, has filed for a national trust charter with the U.S. Office of the Comptroller of the Currency (OCC). The decision positions Paxos among other prominent digital asset firms like Ripple and Circle, which also seek to be regulated by the federal agency. Once granted, Paxos would move on to operate under federal supervision rather than its state-based trust charter, which has a substantial effect on the operational capacities of the company.
Paxos Expands Regulatory Oversight with OCC Application
Initiated in 2015, Paxos was regulated by the New York Department of Financial Services (NYDFS) and was the first limited-purpose trust charter to a blockchain company. This shift to OCC regulation would bring the company under the regulation of a federal authority, stepping it up to the same level as conventional banks and lending institutions.
Paxos intends to continue providing a transparent and highly secure business and consumer infrastructure, highlighting the importance of high regulatory standards. “By applying for a national trust bank charter, we are continuing to offer enterprise partners and consumers the safest, most trusted infrastructure available,” said Charles Cascarilla, CEO and co-founder of Paxos.
This move can be considered part of a wider pattern wherein cryptocurrency companies are seeking federal status. Before Paxos, firms like Ripple and Circle had submitted applications to obtain OCC charters, marking a transition in the digital asset market, with companies looking to become more integrated with traditional financial systems.
Stablecoin Regulation and Impact on the U.S. Financial System
If approved, Paxos could enable custody of customer assets and make payments more effectively. However, it would not allow the company to accept deposits or lend money, thus making it different from traditional banks. The shift is also in line with the recent amendments in the U.S. legislation, as Congress has approved stablecoin-related rules, offering better regulatory clarity to digital asset companies.
This shift to federal regulation has the potential to transform how digital assets intersect with the rest of the financial system as stablecoins like Paxos’s PayPal USD (PYUSD) continue to develop. Further, involvement with the OCC would offer businesses and investors in the stablecoin market a high level of regulatory certainty that can be valuable, and also acquire greater credibility and operational capacities. By entering the same regulatory landscape as traditional banks, it would bridge the gap between digital assets and conventional financial institutions.
Related: Ripple Battles Against 42 Banks to Reshape Global Finance
Future of Paxos and Stablecoin Firms in the U.S.
Notably, this is Paxos’s second application to the Charter. The first one was submitted in 2020, which received preliminary approval from the authorities but expired in 2023. Although the company faced setbacks, it is optimistic about its future. “OCC oversight will help build on our historic commitment to maintaining the highest standards of safety and transparency,” Cascarilla added.
The move can also be attributed to a recent agreement made between Paxos and the NYDFS regarding the Binance USD stablecoin. Nonetheless, Paxos has continued to expand its stablecoin offerings and maintain regulatory compliance in various jurisdictions like Europe and Asia.
The implementation suggests that stablecoins and blockchains will be established in mainstream banking systems in the future, overruling the nature of competition in the financial industry. If this succeeds, it may mark a new era for the intersection of digital finance and banking systems.
