The New York Department of Financial Services (NYDFS) has imposed a $48.5 million penalty on Paxos Trust Company, settling investigations into critical anti-money laundering (AML) and due diligence failures tied to its partnership with Binance. According to the regulator, Paxos neglected essential compliance protocols including insufficient customer vetting for Binance-onboarded users, inadequate transaction monitoring, and delays in reporting suspicious activities.
NYDFS Superintendent Adrienne A. Harris emphasized this enforcement reflects the department's commitment to "safeguarding the financial system from illicit activity". The violations specifically involved Paxos's stablecoin operations, including Binance USD (BUSD), highlighting regulatory concerns over crypto-fiat gateways. This marks NYDFS's latest crackdown following prior actions like its $50 million settlement with Coinbase.
The settlement mandates Paxos to strengthen compliance frameworks under regulatory supervision. Industry-wide implications include heightened scrutiny of exchange partnerships and stablecoin issuers, signaling intensified enforcement of traditional financial standards across crypto.