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Paxos in National Bank Charter

When the application is finally approved, Paxos will become the first digital asset custodian with a national trust bank charter.

Paxos is a stablecoin provider and digital asset company; it has a US national trust bank charter with the Office of the Currency’s Comptroller.

If successful, Paxos would be the “first custodian of digital assets to be regulated at the state and federal levels,” the General Counsel of Paxos, Dan Burstein, wrote in a blog post recently.

The Paxos National Trust will be a subsidiary of Kabompo Holdings, which is assimilated in the Cayman Islands.

Paxos does a part of everything. It offers cash and stablecoin custody services, lets the customers trade crypto through its itBit exchange, issues stablecoins, and uses tokenized settlement for commodities trading.

Furthermore, Paxos’ New York charter enables it gives some fiduciary services.

In the OCC filing, Paxos said that it would “conduct only certain activities that are currently conducted by Paxos’s New York state-chartered trust company and supervised by the [New York Department of Financial Services].” But it stated, “Other activities conducted by Paxos affiliates may be migrated to Paxos National Trust over time based on operational, financial and legal considerations.”

The filing didn’t mention its business with PayPal. Last October, the payments company tapped Paxos Crypto Brokerage to give crypto trading and custody services for Bitcoin, Bitcoin Cash, Ethereum, and Litecoin Cash in the PayPal app.

Paxos has rivalry among its crypto followers to be the first crypto bank with a national charter. Anchorage and BitPay have also recently applied for federal banking charters, likely encouraged by the inspiration of Acting Comptroller of the Currency Brian Brooks, who was a former Coinbase executive.

In an interview with Forbes last month, Brooks indicated that national trust bank charters would be one way for crypto businesses regulated at the state level to operate nationwide without getting a money transmission license.

He noted, “If we have crypto banks, which I think we will very shortly, I think it is in their interest they will have to comply with one set of rules nationwide, that’s the way markets grow.”

The two “crypto banks” operate in the US, namely Avanti Financial and Kraken Financial, have Wyoming state charters that act as special-purpose depository institutions.

In explaining the Paxos’ move, Burstein indicated that it’s really about doing business in the state lines with little headaches:

“Our mission is to modernize financial market infrastructure and enable the movement of any asset, any time, in a responsible way. A national Trust Bank charter would help us realize our goal by enabling us to serve customers across the country in the most efficient way.”

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