FILE PHOTO: Representations of cryptocurrencies are seen in front of displayed words "Cryptocurrency market" and decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Paxos Trust Company, the cryptocurrency firm behind PayPal's stablecoin, said it is applying to create a national trust bank in the U.S., joining a raft of digital asset companies looking to gain a larger foothold in the traditional financial system.
If the charter is granted by the U.S. Office of the Comptroller of the Currency, it would allow Paxos to manage and hold assets on behalf of customers and settle payments faster. Unlike traditional banks, the license would not allow Paxos to take cash deposits or make loans.
If approved, Paxos would convert its limited purpose trust charter with the New York Department of Financial Services to a federal charter under the OCC.
The charter wouldn't change Paxos' business model, but would offer the "highest level of regulatory oversight... that carries more weight in the U.S. and globally," according to a source familiar with the matter.
Paxos previously applied for a national trust bank charter in 2020, and the firm received preliminary conditional approval from the OCC in 2021. But its application stalled and eventually expired in 2023.
Crypto platform Anchorage Digital is currently the only digital asset company with a national trust bank charter.
Stablecoin firm Circle along with crypto firm Ripple also applied for national trust bank charters last month.
Paxos offers businesses blockchain and stablecoin infrastructure and capabilities, and issues several of its own stablecoins. Paxos issues PayPal's stablecoin PYUSD, which has a market capitalization of more than $1 billion.
Stablecoins, a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, are commonly used by crypto traders to move funds between tokens. Their use has grown rapidly in recent years, and proponents say they could be used to send payments instantly.
Last month, U.S. President Donald Trump signed a law to create a regulatory regime for stablecoins, a milestone that experts said could pave the way for the digital assets to become an everyday way to make payments and move money.
The law's passage was the culmination ofa long lobbying effort by the crypto industry, which donated more than $245 million in last year's elections to aid pro-crypto candidates including Trump, according to Federal Election Commission data.
Paxos had previously partnered with Binance, the world's largest cryptocurrency exchange, to market and distribute the Binance USD stablecoin.
New York ordered Paxos in early 2023 to stop issuing Binance's stablecoin, and Paxos subsequently ended the partnership.
Last week, Paxos reached a $48.5 million settlement to resolve New York charges that the company failed to police illegal activity related to Binance, after Binance's former chief executive pleaded guilty to breaking U.S. anti-money laundering laws as part of a $4.3 billion settlement in 2023.
(Reporting by Hannah Lang in New York; Editing by Chizu Nomiyama )
