Stablecoin Provider Paxos to Pay $26.5M Fine to Settle Charges Related to Binance

Stablecoin issuer Paxos Trust will pay a $26.5 million penalty to New York State to resolve charges related to its previous partnership with the world’s biggest crypto exchange, Binance, the New York State Department of Financial Services announced Thursday. 

Along the $26.5 million penalty, Paxos Trust will spend $22 million to improve its compliance program, the announcement added. 

The charges alleged that Paxos failed to conduct sufficient due diligence of its former partner, Binance, and had systemic failures in its anti-money laundering program. 

“Regulated entities must maintain appropriate risk management frameworks that correspond to their business risks, which includes relationships with business partners and third-party vendors,” the New York regulator’s Superintendent Adrienne A. Harris said in a statement.

A Paxos spokesperson told Decrypt: “For the avoidance of doubt, the compliance issues discussed are historical issues that were identified over two and half years ago and have since been fully remediated.

“These matters had no impact on customer accounts and there was no consumer harm. This marks the resolution of this matter and we are pleased to put it behind us.”

Paxos, a fintech company that works to mint digital tokens known as stablecoins, partnered with Binance to mint Binance USD. 

But the New York regulator said that Paxos’s insufficient due diligence on the behemoth exchange allowed U.S. customers to illegally use it, according to the charges. 

Paxos added: “No other blockchain and tokenization platform has shown more dedication to seeking oversight and complying with global institutional standards as Paxos has done for over a decade—and we are committed to maintaining that moving forward.”

The New York-based fintech ended its relationship with Binance in 2023, and the BUSD stablecoin is no longer available.