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DFS is tasked with regulating the stablecoin issuer, which also issues its own stablecoin – Pax Dollar – as well as PAX Gold , a tokenized form of gold. Paxos acquired a BitLicense in 2015, which allows the company to legally conduct digital currency-related activities in the state of New York. Kitco Crypto reached out to Paxos for a comment but did not receive a reply before the time of publication.
Based on recent actions taken by regulators, there are several possible reasons that Paxos may be under investigation. Ever since the collapse of the algorithmic stablecoin TerraUSD in May, regulators have been taking a closer look at stablecoin projects in an attempt to verify the collateral that backs the tokens.
In December, reports emerged that prosecutors with the U.S. Department of Justice were delaying the conclusion of a long-running criminal investigation into Binance out of fear that it would negatively affect the crypto market, which had already experienced a disastrous year of losses. It’s possible that the recovery experienced across the crypto market so far in 2023 has diminished those concerns, allowing U.S. regulators to directly target the exchange.