Paxos, a Stablecoin Issuer, to Settle with $26.5M Penalty Over Binance-Related Allegations

Paxos Trust Company, a firm specializing in stablecoins, has come to an agreement to pay a civil penalty of $26.5 million to settle charges brought by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The accusations stem from purported breaches of sanctions regulations related to dealings involving the cryptocurrency exchange, Binance.

According to a statement released by the Treasury Department, Paxos failed to maintain an adequate compliance framework, which allegedly allowed individuals from sanctioned jurisdictions, such as Iran, to conduct transactions on the Binance platform using Paxos-issued stablecoins. The Treasury Department argues that this undermined the effectiveness of U.S. sanctions.

Paxos has stated that it fully cooperated with the investigation and has taken steps to enhance its compliance program. These enhancements include improvements to its identity verification protocols and the expansion of its transaction monitoring capabilities. Through this settlement, Paxos aims to resolve the matter and concentrate on advancing compliant stablecoin solutions.

This settlement arrives amidst increasing scrutiny of the cryptocurrency sector by regulators worldwide. Governments are seeking to ensure that crypto businesses adhere to anti-money laundering laws and sanctions regulations.

The settlement is expected to have significant repercussions for the stablecoin industry, potentially prompting other companies to re-evaluate their compliance programs. It also emphasizes the critical importance of having robust compliance controls within the rapidly evolving crypto industry.