Paxos is latest regulated crypto bank

Interesting news for fintechs in the crypto banking sector, as Paxos becomes the third crypto-native company to be granted a federal trust charter through the U.S. Office of the Comptroller of the Currency (OCC).

The announcement made by the national bank regulator on Friday 23rd April, said that Paxos now had a preliminary charter. This would allow the firm to bring its new Paxos National Trust entity online as a federally regulated entity offering custody services, stablecoin management, payment, exchange and other services. Paxos is a stablecoin issuer.

This makes Paxos the third crypto entity to receive a bank charter, and it joins Anchorage and Protego in becoming one of the only national trusts that were born in the crypto ecosystem. Kraken and Avanti have also obtained Special Purpose Depository Institution charters through the state of Wyoming.

As Coindesk says, “The move is another sign that the global cryptocurrency ecosystem is becoming increasingly acceptable to regulators, who have traditionally been wary of the still-young industry.” It also shows that the national regulator, the OCC, is comfortable with Paxos as a custodian despite the fact it has suffered a number of crises on its exchange.

Becoming an OCC-regulated trust is one way crypto exchanges can operate nationwide without needing to secure state-level licenses in each of the 49 different US states. Montana doesn’t have a licensing requirement.

Paxos now has a year and a half to execute on its business plan and show the OCC that it can operate safely. At the moment, Paxos’ business plan doesn’t go far beyond its existing operations, which include stablecoin-as-a-service, exchange and custody products and crypto brokerage services.

However, to be clear, Paxos isn’t forming a full bank just yet. It does not have Federal Deposit Insurance Corp. (FDIC) or Federal Reserve approvals, which it would also need in order to be considered to offer a full banking service. Still, it is another signal of encouragement for the crypto ecosystem.

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