The New York Department of Financial Services announced a$48.5 million settlement with Paxos, a crypto infrastructure company. Thesettlement concerns Paxos' partnership with Binance and alleged shortcomings inits anti-money laundering controls.In February 2023, Paxos ceased minting Binance USD tokensfollowing an NYDFS investigation into its relationship with Binance and AMLweaknesses. Binancethen gradually discontinued BUSD support across its platforms.The settlement includes a $26.5 million fine and a $22million commitment from Paxos to enhance its compliance program. NYDFS Highlights Due Diligence FailuresAccording to NYDFS, Paxos failed to perform regular duediligence on Binance. The regulator stated that approximately $1.6 billion inillicit funds passed through Binance via the BUSD stablecoin. As a result, inFebruary 2023, NYDFS ordered Paxos to stop distributing BUSD.Stablecoin Provider Paxos to Pay $26.5M Fine to Settle Charges Related to Binance► https://t.co/O8NXol2Yiz https://t.co/O8NXol2Yiz— Decrypt (@DecryptMedia) August 7, 2025Regulatory Expectations on Risk ManagementAdrienne A. Harris, superintendent of NYDFS, emphasized thatregulated firms must have risk management systems suited to their businessrisks, including those related to partners and vendors.AML and Know Your Customer rules remain centralregulatory concerns in the crypto sector. Several companies are awaitingclearer regulatory guidance on these requirements.You may find it interesting at FinanceMagnates.com: PaxosUps Its Stablecoin Bet: Launches MAS-Compliant USDG.SEC Issues Wells Notice to PaxosEarlier, the U.S. Securities and Exchange Commission issuedPaxos a Wells Notice. The SEC warned of possible legal action over the BUSDstablecoin, accusing Paxos of distributing unregistered securities andbreaching consumer protection laws through its partnership with Binance.NYDFS issued a similar warning one day later. It pointed toinsufficient KYC controls as a key issue and mandated Paxos to conduct duediligence on all new customers.The regulator also noted that while Paxos was authorized toissue BUSD on the Ethereum blockchain, it had not authorized issuance ofBinance-Peg BUSD on any blockchain.This article was written by Tareq Sikder at www.financemagnates.com.