Paxos has reached a $48.5 million settlement with the New York Department of Financial Services (NYDFS) regarding its partnership with Binance. The settlement includes a $26.5 million penalty and an additional $22 million to improve its anti-money laundering (AML) compliance. The NYDFS reported that Paxos did not conduct adequate due diligence on Binance, which is linked to approximately $1.6 billion in illicit flows associated with the Binance USD (BUSD) stablecoin. In a statement, NYDFS superintendent Adrienne A. Harris emphasized the necessity for regulated entities to maintain robust risk management frameworks connected to their business operations and partnerships. This move follows earlier scrutiny from the U.S. Securities and Exchange Commission (SEC), which warned Paxos in February 2023 of potential legal action for distributing ‘unregistered securities’ related to the BUSD. The ongoing regulatory pressures in the cryptocurrency sector highlight the importance of compliance and legal clarity for firms operating in this space.

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