Approval from the Office of the Comptroller of the Currency (OCC) will allow Paxos to custody assets and settle payments nationwide under federal oversight, which could help boost institutional appeal. The filing follows the enactment of the GENIUS Act, the first federal framework for stablecoin issuers, which bans yield-bearing stablecoins. Industry experts believe this will accelerate capital into tokenized assets as institutions look for compliant ways to earn yield. Paxos’ move also happened after a $48.5 million NYDFS settlement and during a time of growing momentum for tokenization in markets. Paxos Eyes Federal License Paxos Trust Company, the crypto infrastructure firm behind PayPal’s PYUSD stablecoin, filed to convert its New York limited-purpose trust charter into a US national trust bank charter, reviving its effort that expired in 2023. If approved, the federal charter from the Office of the Comptroller of the Currency (OCC) will allow Paxos to custody customer assets and settle payments nationwide under federal oversight. This could potentially make the company more attractive to institutional clients. Unlike traditional banks, national trust banks are not permitted to accept cash deposits or issue loans. Paxos co-founder and CEO Charles Cascarilla said OCC oversight will strengthen the company’s long-standing commitment to safety and transparency. Press release from Paxos The renewed application was filed after the expiration of Paxos’ original federal charter approval. The company first applied in December of 2020 and received preliminary conditional approval in April of 2021, which allowed it to work toward meeting capital, compliance, and operational requirements before launching. However, OCC rules stipulate that conditional approvals expire after 18 months if the bank is not opened, and Paxos’ authorization lapsed on March 31, 2023. During that time, the firm continued to operate under its New York limited-purpose trust charter, which it has held since 2015 , and expressed interest in pursuing federal oversight when the timing was more favorable. The expiration came during a period of mounting regulatory pressure, particularly surrounding Paxos’ relationship with Binance. In February of 2023, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing Binance USD due to compliance concerns, which ultimately ended its partnership with the exchange. This scrutiny culminated recently when Paxos agreed to a $48.5 million settlement with the NYDFS over alleged failures to maintain adequate anti-money laundering safeguards during its dealings with Binance. The agreement includes a $26.5 million fine and a $22 million investment in strengthening its compliance program. Announcement from the NY Department of Financial Services Paxos’ renewed application also came shortly after the enactment of the GENIUS Act, which is the first federal framework for stablecoin issuers. Similar charter applications were also filed by companies like Ripple and Circle. GENIUS Act Fuels Tokenization Shift The recently enacted US GENIUS Act could become a major driver of stablecoin adoption both domestically and globally, but its impact may go beyond boosting demand for dollar-backed digital currencies. Industry experts believe the law could unintentionally accelerate capital flows into the tokenization market as investors search for yield on their holdings. One of the central provisions of the GENIUS Act is its prohibition on yield-bearing stablecoins, which prevents holders from earning interest on their digital dollar balances. According to Will Beeson, former Standard Chartered executive and founder of Uniform Labs, this restriction will push t institutions to look for compliant avenues to earn yield while maintaining liquidity. He said in an interview that trillions of dollars in non-interest-bearing stablecoins are poised to enter the digital finance space, and institutional holders are unlikely to sit on idle, depreciating assets. Instead, they will demand yield and infrastructure that allows seamless, compliant access to it. Beeson believes the focus will shift from merely holding stablecoins to enabling programmatic access to risk-free yield and the ability to move between cash and high-quality assets on demand. Aptos Labs’ Solomon Tesfaye, also sees tokenization benefiting as much as stablecoins from the GENIUS Act’s framework. To meet this demand, Uniform Labs is developing Multiliquid, an institutional liquidity layer for tokenized markets that facilitates programmable, real-time conversion between tokenized assets — like US Treasurys and money market funds — and stablecoins. The platform’s open architecture allows compliant issuers to integrate without commercial agreements. While Beeson declined to name partners, he confirmed that Uniform Labs is collaborating with several leading institutions, fintech firms, and stablecoin issuers ahead of its planned launch later this year. Before founding Uniform Labs, Beeson was chief product officer at Libeara, a tokenization platform incubated by Standard Chartered’s SC Ventures. The tokenization trend, according to World Economic Forum’s Sandra Waliczek , is set to expand beyond private credit and government bonds into asset classes like real estate and private equity. She pointed out that tokenization enables fractional ownership by breaking traditionally exclusive assets into smaller, more affordable units, thereby broadening access to a wider range of investors.
