In the letter
- Paxos has applied for a Bundesbank charter.
- There are still no nationwide regulated “crypto banks”, although several crypto companies have applied for charters.
- The Acting Comptroller of the OCC has encouraged crypto companies to apply for national charters.
Paxos, a Stablecoin Digital asset provider and company has applied for a US trust bank charter to the Office of Foreign Exchange Validators.
If successful, Paxos, already regulated as a trust company in New York, would be “the first digital asset manager to be regulated at both state and federal levels,” wrote Dan Burstein, General Counsel of Paxos blog entry today.
The resulting Paxos National Trust would be a subsidiary of Kabompo Holdings, incorporated in the Cayman Islands.
Paxos does a bit of everything. It offers cash and stablecoin custody services, enables customers to trade crypto through the itBit exchange, issues stablecoins (including BUSD with Binance and PAX), and uses token settlement for merchandise trading.
Additionally, the New York Charter allows Paxos to provide some escrow services.
In its OCC filing, Paxos said it will initially “only conduct certain activities currently conducted and regulated by Paxos’ state-chartered New York trust company [New York Department of Financial Services]. However, it states, “Other activities carried out by Paxos subsidiaries may migrate over time to the Paxos National Trust for operational, financial and legal reasons.”
Business with PayPal is not mentioned in the submission. In October the Payment company tapped Paxos Crypto Brokerage Crypto trading and custody services for Bitcoin, Bitcoin Cash, ether, and Litecoin within the PayPal app.
Paxos has competition among its crypto cohort to be the first crypto bank with a national charter. BitPay and Anchorage also recently filed for Bundesbank charters, likely encouraged by the encouragement of incumbent currency auditor Brian Brooks, who is himself a former Coinbase manager.
In one (n Interview with last month ForbesAfter BitPay and Anchorage filings, Brooks stated that the national trust banks’ charters would provide a way for crypto companies, currently regulated at the state level, to operate nationally without a license to transfer money .
He said, “If we have crypto banks that I think we’ll be deploying anytime soon, it’s in their best interest that they have a set of rules across the country. That’s how markets grow.”
Currently, the two US “crypto banks” Avanti Financial and Kraken Financial have Wyoming State charters that act as custodians for special purposes.
In explaining the move by Paxos, Burstein pointed out that it really is about doing business across national borders with fewer headaches: “Our mission is to modernize the financial market infrastructure and enable the trustworthy transport of assets at all times. A national charter from the Trust Bank would help us achieve our goal of serving clients across the country in the most efficient way possible. “