Blockchain and cryptocurrency firm Paxos has applied for a national trust charter from the Office of the Comptroller of the Currency (OCC). This move would allow the company to operate as a federally regulated national bank.
Paxos Trust Company, PayPal’s stablecoin issuer, submitted a national trust charter application on Monday in a renewed, high-stakes effort to secure federal legitimacy. This action has escalated the regulatory competition with its competitors, Ripple and Circle.
If approved, the charter would enable the firm to operate nationwide with greater regulatory credibility and upgrade its New York license to a federal one, thereby placing it under direct OCC oversight.
From State Limits to National Reach: Paxos eyes OCC approval
In 2015, Paxos became the first blockchain and tokenization platform to receive a limited-purpose trust charter, and it has been operating under the NYDFS regime ever since. The license allowed Paxos to issue regulated products, such as the first regulated stablecoin in 2018, but it was restricted to New York and states with reciprocal agreements.
Paxos is pursuing a national trust charter to eliminate its New York-only restrictions, providing it with nationwide authority without needing separate state licenses. This would also enhance its reputation by enabling it to access federal payment networks and benefit from unified OCC oversight.
OCC supervision can potentially establish Paxos as one of the world’s most stringently regulated blockchain entities. The company anticipates this will be a compelling factor for major financial institutions contemplating stablecoin and tokenization solutions. Charles Cascarilla, CEO of Paxos, stated, “We are committed to providing the most secure and reliable infrastructure for our enterprise partners and consumers by applying for a National Trust Bank charter.”
The timing is based on the recent passage of federal stablecoin legislation under the GENIUS Act, which established a more transparent regulatory framework for digital dollar-pegged assets. According to Paxos, this convergence between federal regulations and its compliance history creates “a critical opportunity to expand our services nationwide.”
Paxos is currently subject to the supervision of the Monetary Authority of Singapore (MAS), the Financial Supervisory Authority in Europe (FIN-FSA), and the Financial Services Regulatory Authority (FSRA) in Abu Dhabi, as part of a multi-jurisdictional framework.
Cascarilla believes that it is the subsequent logical step in developing infrastructure that “energizes financial freedom through blockchain” while simultaneously satisfying the requirements of global regulators, which are becoming increasingly rigorous.
OCC Charters Become the Latest Prize in Crypto’s Expansion Push
Paxos’ OCC application is consistent with the actions of Circle and Ripple, two other prominent stablecoin and blockchain companies also pursuing national trust bank charters.
However, Anchorage Digital is the sole active crypto entity granted a conditional OCC national trust charter, which was granted in January 2021. Anchorage’s experience demonstrates the model’s potential and drawbacks. Although its charter permitted the expansion of crypto-native services, compliance deficiencies regarding anti-money laundering (AML) necessitated an OCC consent order in 2022.
The obstacles to obtaining and maintaining a national charter are substantial. Not all previous petitioners were successful; the Protego Trust and the earlier Paxos application ultimately failed to meet OCC expectations and expired.
In the interim, the American Bankers Association and four other significant trade associations have expressed strong opposition to the application of new crypto charters.
The groups urged the OCC to disclose additional information on business plans before proceeding, arguing that the public portions of these applications lack sufficient detail for meaningful scrutiny in a letter dated July 17. They cautioned that issuing such charters, which do not involve insured deposits or lending, would constitute a substantial policy change that necessitates more extensive public input.
Paxos has continued to issue and manage stablecoins such as PayPal’s PYUSD and gold-backed PAXG while expanding its footprint through partnerships with Mastercard, Interactive Brokers, and MercadoLibre this year. The Binance USD (BUSD) stablecoin was issued and distributed by Paxos in collaboration with Binance, the world’s largest cryptocurrency exchange.
Paxos terminated the partnership in early 2023 after the New York Department of Financial Services ordered the company to cease the issuance of BUSD.
As recently as last week, Paxos consented to pay $48.5 million to resolve New York State charges that it neglected to monitor illicit activity associated with Binance adequately. The settlement was reached in 2023 after Binance’s former CEO pleaded guilty to U.S. anti-money laundering violations as part of a $4.3 billion resolution.
