Key Takeaways:
- National Trust Charter: On its federal aspirations, Paxos wants to transition its NYDFS trust charter into a national trust bank license under the OCC.
- Regulatory arms race: This follows similar instances by Circle (USDC) and Ripple (RLUSD) under new stablecoin laws.
- International credibility: OCC’s approval would put Paxos under federal supervision, boosting trust for partners like PayPal and Mastercard..
- Previous application: Paxos received conditional approval from the OCC in 2021; however, its application lapsed in 2023.
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Paxos Bets Big on Federal Oversight
Paxos has applied for a national trust charter from the U.S. Office of the Comptroller of the Currency (OCC), aiming to solidify its position as a leading regulated crypto infrastructure provider. If approved, it would transition Paxos from its current state-level New York license to a federally chartered status, alongside other regulated crypto firms like Circle and Ripple, and help create a deeper connection to traditional finance (TradFi).
On these matters, timing is everything. Last month, the GENIUS Act passed through Congress, putting in place clearer federal-level stablecoin rules, leading to an all-out race for legitimacy. Paxos expects that OCC’s inclusion will help Paxos keep on building on its commitment to the highest levels of safety and transparency.
Why National Trust Charter Matters
A national trust charter does not just provide compliance with regulatory processes; it provides a competitive advantage to companies. Different from traditional banks, trust banks cannot both lend money and accept direct deposits from customers, but they can manage custody of assets and process payments faster. For Paxos, which is the issuer of PayPal’s PYUSD, as well as the gold-backed PAXG, federal approval would:
- Allow them to operate in all fifty states (no more inconsistent state licenses).
- Help them onboard institutional partners that are concerned about regulatory gray areas.
- Provide a perception of stability, amidst intensified cracks on Paxos, such as their recent $26.5 million settlement with the New York Department of Financial Services (NYDFS) regarding Binance’s BUSD stablecoin.
More importantly, the charter would not affect Paxos’ business model. The reserve amount required to support the stablecoins (held in cash and Treasuries) would continue to be bankruptcy-remote and 1:1 redemption intact. A pretty “stable” scheme.
Crypto’s Banking Push
Paxos is not alone. Stablecoin issuers like Circle (USDC) and Ripple (RLUSD) also applied for national charters, and Anchorage Digital is still the only fully OCC-chartered crypto-native firm. Each company reflects a greater industry shift since the crypto set wants to no longer disrupt banks, but be the banks instead.
The OCC’s May 2025 decision to allow national banks’ custodianship of crypto further obscured the lines. Now under a clearer stablecoin legislation, the race to be the first mover in a market that is projected to reach $3T by 2030 is on.
To this point, the Paxos application from 2021 is now at a standstill, and some doubters are asking if the OCC will expedite approvals under the present management. On the other hand, Paxos’ competitors like Tether (USDT) are continuing business as usual and can do so without oversight in the United States, which brings into question the concept of regulatory arbitrage.
Trust as a Currency
For Paxos, the national trust charter is not just a license; it is also a marketing tool. In an industry where there is not much trust in private sector players, having the backing of the federal government could mean, at least for risk-averse institutions, that Paxos’ stablecoins are the top choice.
For more crypto banking-related stories, read: Fed Drops Crypto Banking Rules: What It Means for Investors
