NYDFS Imposes $26.5M Fine on Paxos, Orders Compliance Overhaul in Binance Stablecoin Case

The New York Department of Financial Services (NYDFS) has announced a settlement with Paxos Trust Company, requiring the firm to pay a $26.5 million penalty for deficiencies in its anti-money laundering and sanctions compliance program. This action follows an NYDFS investigation into Paxos’ issuance of the Binance USD (BUSD) stablecoin. The probe revealed that Paxos failed to adequately monitor BUSD transactions and properly segregate assets, leading to potential risks. In addition to the fine, the NYDFS has mandated that Paxos implement comprehensive improvements to its compliance program. This includes enhancing its monitoring system for BUSD and other transactions, strengthening customer due diligence procedures, and engaging an independent monitor to assess the effectiveness of its compliance program. Furthermore, the NYDFS has directed Paxos to provide regular reports on its compliance efforts. This settlement demonstrates the NYDFS’s commitment to ensuring the safety and soundness of cryptocurrency markets and protecting consumers from potential harm. It also serves as a reminder to firms operating in the cryptocurrency space about the importance of adhering to anti-money laundering and sanctions regulations.