Paxos Pays $48.5M to Settle With NYDFS Over Binance Stablecoin Ties
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Paxos agrees to pay New York regulators over issues tied to its former partnership with Binance and handling of BUSD stablecoin.
Paxos has reached a $48.5 million settlement with the New York Department of Financial Services (NYDFS) following a regulatory probe into its compliance failures during its partnership with Binance. The deal includes a $26.5 million penalty and an additional $22 million commitment to upgrade its internal compliance systems.
The settlement, announced Thursday, stems from alleged lapses in anti-money laundering oversight, particularly surrounding the Binance USD (BUSD) stablecoin, which Paxos issued on behalf of the global crypto exchange.
“Paxos failed to implement adequate safeguards and risk management procedures while facilitating billions in crypto transactions,” an NYDFS official stated in the announcement.
The regulator highlighted that Paxos did not conduct regular due diligence on Binance, resulting in $1.6 billion in illicit flows between the two firms through BUSD. These findings led to enforcement action in early 2023 and the eventual shutdown of BUSD issuance.
The compliance shortcomings coincided with increased federal scrutiny, including a Wells Notice issued by the U.S. Securities and Exchange Commission (SEC) in February 2023. The notice accused Paxos of distributing unregistered securities through its role in managing and promoting BUSD. However, the SEC withdrew the notice in 2024, easing legal pressure on the firm.
Still, NYDFS maintained its enforcement stance, claiming the stablecoin violated New York’s crypto compliance regulations. Paxos ultimately ceased new issuance of BUSD and distanced itself from Binance, pivoting toward other regulated offerings like its own USDP stablecoin.
“This resolution underscores our commitment to compliance and responsible innovation in digital assets,” a Paxos spokesperson said following the announcement.
The case adds to growing tension between crypto infrastructure firms and regulatory bodies, as agencies push for tighter oversight amid concerns about transparency, consumer protection, and illicit finance risks.
With the settlement finalized, Paxos is expected to implement a revamped compliance framework to remain eligible for operating under New York’s BitLicense program.
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This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.
