08.08.2025 07:46
The New York Department of Financial Services (NYDFS) levied a substantial $26.5 million fine against Paxos, a prominent New York City-based stablecoin issuer. This significant penalty stems from systemic deficiencies uncovered within Paxos' compliance and anti-money laundering programs, directly linked to its past collaboration with Binance, the world's leading cryptocurrency exchange. The penalty reflects the NYDFS's unwavering commitment to safeguarding consumers and maintaining the integrity of the financial system.
Beyond the financial penalty, Paxos has also committed to investing an additional $22 million in bolstering its compliance infrastructure. This substantial investment aims to bring its operations fully into alignment with the stringent standards set by the NYDFS. Superintendent Adrienne Harris underscored the NYDFS’s proactive role in regulating the virtual currency sector, highlighting their commitment to robust oversight and enforcement actions when necessary. The regulator emphasized the crucial need for regulated entities to implement comprehensive risk management frameworks, encompassing all aspects of their business operations, especially collaborations with partners and third-party vendors.
The NYDFS investigation, which prompted the fine, focused on Paxos's former partnership with Binance, specifically concerning the issuance of Binance USD (BUSD), a dollar-pegged stablecoin. This collaboration, initiated in 2019, ultimately led to significant regulatory scrutiny. In 2023, the NYDFS launched a formal investigation into Paxos's BUSD issuance, while concurrently, the Securities and Exchange Commission (SEC) served Paxos with a Wells notice, signaling their intent to pursue legal action. Although the SEC later withdrew its enforcement action, the NYDFS investigation continued, resulting in the substantial fine announced recently. Paxos, under directive from the NYDFS, subsequently ceased BUSD issuance.
The NYDFS investigation revealed critical failings in Paxos's internal controls designed to detect and prevent illicit activities channeled through Binance. The regulator determined that Paxos's response to identified suspicious activities was inadequate; failing to escalate flagged transactions promptly and effectively. This deficiency underscored a critical lack of robust monitoring mechanisms within Paxos's operations. The substantial fine serves as a strong deterrent, emphasizing the crucial importance of stringent compliance adherence within the rapidly evolving cryptocurrency landscape. The actions taken by the NYDFS clearly illustrate a commitment to holding financial institutions accountable for maintaining robust anti-money laundering and compliance programs.
