Paxos Pays $48.5M to Settle BUSD Probe with NY Regulator

Paxos Trust Company has agreed to pay $48.5 million to the New York State Department of Financial Services (NYDFS), settling a regulatory probe tied to its 2018 partnership with Binance to launch the BUSD stablecoin.

The agreement includes $26.5 million in penalties and $22 million allocated to bolster Paxos’ compliance program. NYDFS found that Paxos failed to conduct sufficient due diligence before partnering with Binance, and that its anti-money laundering (AML) controls were inadequate at the time.

NYDFS Superintendent Adrienne Harris stressed that regulated firms must properly assess the risks of third-party relationships. The regulator also highlighted concerns that Binance may have failed to block U.S. users from accessing its unregulated exchange, a key point Paxos reportedly raised during the partnership.

Paxos responded by stating the issues were identified over two years ago and have since been fully remediated. The company emphasized that there was no customer harm or impact on user accounts.

BUSD was designed to be fully backed 1:1 by U.S. dollars, with Paxos acting as the issuer and custodian. The resolution underscores increased regulatory scrutiny on stablecoin compliance and the role of crypto-fintech partnerships in the broader U.S. financial system.

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