Paxos Joins the Race for National Trust Bank Status—Hot on the Heels of Circle and Ripple

Crypto's quiet giant makes its power play.

Paxos—best known for its stablecoin muscle—is now gunning for national trust bank status, following similar moves by rivals Circle and Ripple. The regulatory chessboard just got more interesting.

Why this matters: A trust charter would let Paxos operate across state lines without the usual patchwork of licenses. Translation? Faster expansion, fewer compliance headaches—and a potential edge in the custody wars.

The subtext: Every crypto firm suddenly wants to be a bank when the SEC comes knocking. How very convenient.

Watch this space: If approved, Paxos could custody anything from tokenized stocks to Bitcoin ETFs. Not bad for a company that started with a gold-backed token (and yes, we remember).

Bottom line: The race to become crypto's preferred regulated gateway just got hotter. Just don't call it a 'bank run'—some of us still have PTSD from 2023.

What to Know:

• Paxos issues PayPal's PYUSD stablecoin, which maintains over $1 billion in market capitalization
• The company previously received conditional approval from federal regulators in 2021, but that authorization expired in 2023
• A successful application would allow faster payment settlements and asset management under federal oversight

Regulatory Pathway and Industry Context

The application targets approval from the Office of the Comptroller of the Currency, which WOULD grant Paxos authority to manage customer assets and process payments more efficiently. However, the charter differs significantly from traditional banking licenses. The trust bank designation prohibits taking cash deposits or issuing loans, focusing instead on asset custody and payment processing services.

Paxos currently operates under a limited purpose trust charter issued by New York's Department of Financial Services.

The federal charter would replace this state-level authorization with national regulatory oversight. According to sources familiar with the application, the change would not alter Paxos's Core business model but would provide "the highest level of regulatory oversight" recognized both domestically and internationally.

This marks the company's second attempt at federal banking authorization. Paxos initially applied for national trust bank status in 2020 and received preliminary conditional approval from the OCC the following year. That application ultimately stalled and expired in 2023, leaving the company to continue operations under its New York charter.

Stablecoin Market and Recent Developments

The timing coincides with significant regulatory clarity for digital assets, particularly stablecoins. These cryptocurrencies are designed to maintain stable value, typically pegged one-to-one with the US dollar, and serve as crucial infrastructure for crypto trading and payments.

President Donald Trump signed comprehensive stablecoin legislation last month, establishing the first federal regulatory framework for these digital assets. Industry experts view this development as potentially transformative, creating pathways for stablecoins to function in everyday payment systems. The legislation represents the culmination of extensive lobbying efforts by cryptocurrency companies, which contributed over $245 million to pro-crypto candidates during recent elections, according to Federal Election Commission records.

Paxos operates as a blockchain infrastructure provider, offering stablecoin issuance and custody services to businesses. The company's most prominent product is PYUSD, PayPal's stablecoin that has grown to exceed $1 billion in market capitalization. Stablecoins have experienced rapid adoption among crypto traders who use them to transfer funds between different cryptocurrencies, and proponents argue they could revolutionize instant payment systems.

Currently, Anchorage Digital remains the only cryptocurrency company holding a national trust bank charter. However, the competitive landscape is shifting rapidly, with Circle and Ripple submitting their own applications for federal banking authorization within the past month.

Legal Challenges and Settlement History

Paxos's application comes shortly after resolving significant regulatory issues with New York authorities. The company agreed to a $48.5 million settlement last week to address charges that it failed to adequately monitor illegal activities connected to its former partnership with Binance.

The settlement stems from Paxos's previous collaboration with Binance, the world's largest cryptocurrency exchange, to create and distribute the Binance USD stablecoin. New York regulators ordered Paxos to cease issuing Binance's stablecoin in early 2023, effectively ending that partnership.

The regulatory action followed broader enforcement against Binance, whose former chief executive pleaded guilty to violating US anti-money laundering laws as part of a $4.3 billion settlement with federal authorities in 2023. These legal challenges highlight the complex regulatory environment facing cryptocurrency companies seeking traditional banking privileges.

Financial Terms and Cryptocurrency Definitions

Understanding the regulatory significance requires familiarity with key cryptocurrency concepts. Stablecoins represent a category of digital assets engineered to maintain consistent value, typically through reserves of traditional currencies or other assets. Unlike volatile cryptocurrencies such as Bitcoin or Ether, stablecoins aim for price stability to facilitate commerce and trading.

Trust bank charters differ from conventional banking licenses by focusing on fiduciary services rather than deposit-taking or lending activities. These institutions primarily manage assets on behalf of clients and facilitate payment processing, making them particularly suitable for cryptocurrency infrastructure companies.

The market capitalization figure of $1 billion for PYUSD represents the total value of all tokens in circulation, calculated by multiplying the current supply by the token's market price.

Closing Thoughts

Paxos's renewed pursuit of federal banking authorization reflects the cryptocurrency industry's broader integration with traditional financial systems. The company's application, combined with similar moves by Circle and Ripple, suggests growing confidence in regulatory clarity following recent legislative developments. Success would position these firms for expanded operations under federal oversight while maintaining their focus on digital asset infrastructure.