Paxos Becomes Third Crypto Firm to Receive OCC National Trust Bank License

This article comes fromThe Block, original author: Aislinn Keely

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• , original author: Aislinn KeelyPaxos National Trust。

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secondary titleOCCSummary:

Approved Application for Paxos to Establish a New National Trust Outside New York Regulatory EntityAnchorageandProtegoBoth of these separate trusts will be managed by the Paxos team.

Crypto firm Paxos gets U.S. Office of the Comptroller of the Currency (OCC)

) conditional preliminary approval of its application for a banking license, allowing it to split its operations into two entities: one regulated at the national level and the other maintaining the existing regulatory structure.

Paxos is not the first crypto company to receive a conditionally approved license from the OCC;

Both received approval from the banking regulator earlier this year. However, Paxos was the first company to receive approval for a so-called "De Novo" application, allowing it to launch an entirely new bank.

Ultimately, Paxos plans to operate two trusts by the end of next year — one under the National Bank Charter and the other under the New York State BitLicense.

When Anchorage and Protego applied for banking status, they attempted to convert their state regulated entities into federally regulated entities, ditching their former state trust structure. But Paxos' De Novo filing means it will create an entirely new bank in addition to its existing trust. Paxos Existing Trust has a BitLicense issued by the New York Department of Financial Services (NYDFS).

Under the terms of the conditional approval of the banking license, Paxos has up to 18 months to fulfill the conditions; once its national trust is up and running, there will be two distinct Paxos trusts.

According to Paxos chief compliance officer Daniel Burstein, they will be "distinct entities" but will rely on people from the same team at Paxos, rather than having two separate teams.

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Why become a bank?

With that in mind, why should you apply to become a bank?

With the OCC's approval, Paxos "has a clear right to operate nationwide," according to Burstein. That means it is free to host U.S. dollars and cryptocurrencies, offer stablecoins nationwide; and operate exchanges nationwide if it chooses.

The company could have obtained a nationwide Money Transmitter license, but that would not provide the same level of oversight as the banking regulator, Burstein said. Banking licenses require higher capital and audits, and Paxos wants to be seen as the most trusted company in the digital asset space.

"We could have gone a lot of other routes, but they don't provide the kind of reliability we're looking for, and they don't give the market the credibility we're looking for," Burstein said.

Additionally, the MSP license does not allow it to take custody of assets, while Paxos remains committed to being a custodian. When its National Trust license comes into effect, it will relinquish most of its remittance service provider licenses, but not its BitLicense.

secondary titleBuild a regulatory frameworkTo meet the requirements of its conditional approval, Paxos must execute the business plan submitted to the OCC within the next 18 months. The bank will then be reviewed by the regulator to ensure it complies with the parameters set out in the submission, after which the bank will no longer require its separate money transmitter license.

But Paxos will retain its BitLicense. Given Paxos' longstanding relationship with NYDFS, there's no need to abandon the regulatory infrastructure that Paxos has built in New York for more than six years, Burstein said.