The U.S. Office of the Comptroller of the Currency (OCC) today granted the stablecoin company and PayPal employee Paxos a federal charter to form a national trust bank – only the third such charter the OCC has granted crypto-native companies .
Paxos joins custodian Achorage, which was the first to receive a charter in January, and fellow custodian Protego, who received their conditional charter in February.
As with the previous two charters, the ‘bank’ label is somewhat misleading as Paxos will not handle deposits immediately. Instead, they received a “Fintech charter” – a type of banking charter developed by former acting currency controller Brian Brooks.
The charter allows Paxos to perform activities such as “custody of digital assets; custody and management of USD stablecoin reserves; payment, exchange and other agent services; other cryptocurrency services, such as trading services and enabling partners to buy and sell cryptocurrencies; and “know your customer” as a service, “according to a letter of approval from the OCC sent to Dan Burstein, Paxos’ general counsel.
The letter notes that all of these activities are currently conducted by the Paxos Trust Company operating with a New York BitLicense; the charter allows a new Paxos entity to become a federally regulated organization.
The letter from the OCC also indicates that there was some resistance to the issuance of the charter from the traditional banking sector.
During a public comment period, the OCC received a “letter signed by a number of trading groups representing banks” arguing that “the proposed activities are inconsistent with the OCC’s precedent regarding fiduciary activities carried out by national trust banks”, and that “the application does not provide sufficient information about the Bank’s business model.”
However, the OCC objected that they “had received sufficient information to make an informed decision” and ultimately decided that “it is appropriate to grant provisional conditional approval so that the organizers can proceed with the organization of the Bank”.
The approval follows a string of high-profile wins for Paxos. In December, the company raised $ 142 million in a funding round and in April it applied for a clearing license following a successful pilot of a same-day stablecoin settlement with Credit Suisse, among others.