"Trust is not an optionit's a requirement"

Paxos explains its unique approach to pioneering a new market. 

Dan Burstein
General Counsel & Chief
Compliance Officer at Paxos
Sep. 30, 2021

The following blog post is by Dan Burstein, General Counsel and Chief Compliance Officer at Paxos. Paxos is the qualified custodian responsible for all cryptocurrency trade execution and custody services for Flourish Crypto.1


At Paxos, our mission is to build the foundation for a financial system where all assets, from money to commodities to securities, can be digitized and moved securely and instantly. Cryptocurrencies and digital assets represent a “brave new world” in financial services. But just because something is new, does not mean it cannot be trusted. Paxos—a highly regulated financial institution with regulated product lines—was created to address this challenge head-on. 

We understand that advisors, in particular, have concerns around custody and regulation. We’re excited to partner with Flourish Digital Assets and help bring cryptocurrency buying, selling and custody services to RIAs and their clients by serving as a secure, trusted, regulated, audited, qualified custodian for Flourish Crypto. We’ve spent years building our oversight and regulatory stack and believe that we’re unique in our dedication to building trust as a critical part of offering digital assets at scale. 

As the General Counsel and Chief Compliance Officer for Paxos, I take these commitments to heart. Similarly, we know that RIAs like you have a fiduciary responsibility to safeguard the assets of your clients, while working within a heavily regulated industry. Flourish Digital Assets and Paxos partnered because of this shared focus on trust, allowing you to be confident in the crypto solution you’re offering your clients. 

Read on for details about our regulatory, audit, and licensing standards and practices, and feel free to share this information with clients who want to know how their assets are secured. 

Regulatory credentials:

Paxos (then known as itBit) was the first company to secure a New York State Department of Financial Services (NYDFS) Trust Charter for Digital Assets in 2015. The Paxos Trust charter is the base layer that enables us to operate in other regulatory environments because the NYDFS maintains such high standards for its regulated entities. Some of the world’s biggest financial institutions, like Bank of New York-Mellon, State Street, and Fidelity, are all NYDFS Trust companies.

What does this mean?

With this regulatory designation, Paxos is required by the NYDFS to hold all customer assets bankruptcy-remote and separate from corporate assets, so clients know their crypto assets are always there and always in their name. 

The Trust charter is the foundational component of the regulatory stack upon which Paxos has continued to build, with core products individually regulated. Our exchange, known as itBit Exchange, and the custody services that underpin Paxos Crypto Brokerage, are both regulated by the NYDFS as well. The NYDFS regularly audits operations, finances, policies, and procedures for these products in addition to auditing Paxos overall. Recognized third-parties attest to the integrity of our company and products.

Audits and additional designations:

Audits and additional designations speak to the rigor and high standards of accountability to which we hold ourselves: 

  1. We’ve secured comprehensive licensing so that we can offer services nationwide. 
  2. We’re the only crypto native company with full access to the US Federal Reserve National Settlement Service, which allows us to move money and settle transactions more efficiently. 
  3. Third-party, independent auditors have verified that our stablecoin, exchange and custody services meet both SOC 1 Type 2 and SOC 2 Type 2 standards. We’re one of the few crypto companies to achieve this designation. 
  4. Our affiliate, Paxos National Trust, recently secured conditional approval from the Office of the Comptroller of the Currency for a de novo National Trust Bank charter.2

The bottom line:

For Paxos, trust is not an option. It is a requirement at every level of our operations. Paxos is building a B2B enterprise business where our partners, like Flourish, are some of the most sophisticated financial and tech institutions in the world, accustomed to working with the best of the best in highly-regulated, investor-protection oriented environments. We believe our approach to regulation demonstrates just how our operations meet the highest standards in our field—and why you and your clients can in turn trust Flourish’s Paxos-powered cryptocurrency solution.

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Flourish is an online platform through which investors can access financial services and products.  The services and products offered through Flourish are provided by different entities and are subject to different terms, investor protections and risks.  Flourish Cash is offered by Flourish Financial LLC, a registered broker-dealer and FINRA member. Flourish Financial LLC is not a bank. Check the background of Flourish Financial LLC and its personnel on FINRA's BrokerCheck.  Flourish Crypto is offered by Paxos Trust Company, LLC (Paxos), a New York limited purpose trust company regulated by the New York Department of Financial Services that provides cryptocurrency custody and execution services for the Flourish Crypto accounts, and Flourish Digital Assets LLC (Flourish Digital Assets), which is registered in New York as a commodity broker-dealer and provides website and other technology services and support for Flourish Crypto accounts.  Flourish Financial LLC and Flourish Digital Assets LLC are affiliates, but are not affiliates of Paxos.  Please review the Legal section of our website, and the disclosures provided with each Flourish service or product, for further information regarding each service and product.  If you were introduced or invited to Flourish by a third-party investment adviser or other third party, whose name or logo may be shown above, please be aware that, unless otherwise disclosed to you, they are not affiliated with any Flourish entity.  The role of the investment adviser or other firm that invited you to Flourish may vary between different Flourish services and products, as further described in the terms for each service or product.  © 2021 Flourish.  All rights reserved.

1 Flourish Crypto is a cryptocurrency investment account through which investors can trade cryptocurrencies and maintain custody of cryptocurrencies and U.S. dollars. Custody of Flourish Crypto accounts, including all assets in the accounts, and cryptocurrency trading services are provided by Paxos Trust Company, LLC (Paxos) in accordance with the Paxos Terms.  Paxos is a New York limited purpose trust company regulated by the New York Department of Financial Services.   Website and other technology services and support for Flourish Crypto accounts are provided by Flourish Digital Assets LLC (Flourish Digital Assets) in accordance with the Flourish Crypto Terms.  Flourish Digital Assets is registered in New York as a commodity broker-dealer.  Investment options in Flourish Crypto accounts are currently limited to bitcoin.  Cryptocurrencies held in Flourish Crypto accounts are not currently eligible for in-kind transfer to other custodians or cryptocurrency wallets.  If a Flourish Crypto account is closed, the customer’s cryptocurrency positions will be liquidated and the customer will receive the U.S. dollar proceeds.  Investing in cryptocurrencies involves a high degree of risk, as further described in the risk disclosures section of the Paxos Terms and the Flourish Crypto Terms.  Flourish Crypto accounts are separate from Flourish Cash accounts and assets in Flourish Crypto accounts are not eligible for protection by the Securities Investor Protection Corporation (SIPC).

2  Paxos National Trust is an affiliate of Paxos Trust Company, LLC (Paxos), but does not currently provide any services for Flourish Crypto accounts.