With stablecoins becoming a ubiquitous part of the crypto landscape, many traders wonder about which one is the safest or most efficient for their purposes. The latest reports concerning Paxos Standard are not very welcoming towards those who are doing their own research about the stablecoin.
According to a report published today by ccn.com, Paxos Standard has been over questioning users who try to redeem their PAX for dollars. Crypto Twitter is already reacting on the news:
This doesn't come as a total surprise to most people but if you were really excited about stablecoins you should probably read this article.— WhalePanda (@WhalePanda) December 30, 2018
Don't use stablecoins unless you want to provide full KYC, history of trading, history of funds,... (dna soon?)https://t.co/Te1GEQsof1
This was going to happen eventually. All regulated stablecoins (Paxos, USDC and Gemini dollar) are obligated to know the source of funds coming to redemption. https://t.co/ZYE9RReaWj pic.twitter.com/Qf3cCUe0Y3— Larry Cermak (@lawmaster) December 30, 2018
Paxos, a NYSDFS regulated company, promises a stable, supported, no fees and fast (operating outside of banking hours, they claim) one-to-one redemption of PAX for USD.
However, the report assures that a group of 5 traders who trade several million dollars a week, saw their funds withheld for a week or more, with one of them not having been able to fulfill the redemption at publishing time.
The common issue shared by the group of traders was an excess of questions coming from the Paxos Standard team, which seemed to be weary of the origin of the funds, the use of several Binance addresses or the identity of the possible counter parties of the traders.
Further questions from Paxos Standard team include enquiries about the user´s trading strategy, their name, location, position and salary, or anticipated monthly activity for purchases and redemptions, among many other sensitive details.
The company replied to these allegations without giving specific information about the cases mentioned in the report, but stating the following:
“Yes, we have closed a few accounts, only for very good reasons. It’s all for the sake of AML/KYC compliance. While we don’t comment on the status of individual account activity, we can tell you about the patterns we’ve seen lately.”