Last Modified: October 31, 2024

PLEASE NOTE: YOU MAY NO LONGER PURCHASE BUSD FROM PAXOS OR WITHDRAW BUSD FROM YOUR ACCOUNT. YOU MAY REDEEM YOUR BUSD FROM PAXOS SUBJECT TO THESE USD STABLECOIN TERMS AND CONDITIONS. PAXOS NO LONGER MINTS NEW BUSD BUT ALLOWS CUSTOMERS TO REDEEM BUSD.

The US Dollar-Backed Stablecoin Terms and Conditions (hereinafter “USD Stablecoin Agreement” or “USD Stablecoin Terms and Conditions”) constitute an addendum to the General Terms and Conditions for the provisions of and use of (i) the US dollar denominated and backed stablecoin managed by Paxos Trust known as Paxos Dollar tokens (“USDP”), (ii) the US dollar denominated and backed stablecoin managed by Paxos Trust known as PayPal USD (“PYUSD”), (iii)  the US dollar denominated and backed stablecoin managed by Paxos Digital Singapore Pte. Ltd. (“Paxos Digital”) known as Global Dollar (“USDG”), (iii) the US dollar denominated and backed stablecoin managed by Paxos Trust known as BUSD that is currently only available for redemption (“BUSD”), and (iv) other US dollar denominated and backed stablecoins that may be managed by Paxos or its affiliates from time to time and added to this USD Stablecoin Agreement (collectively and together with USDP, PYUSD, USDG and BUSD, the “USD Stablecoins”). These terms apply to each electronic form or contract executed by users and/or Customers who use USD Stablecoins, unless expressly stipulated otherwise in the Paxos Contractual Documentation. To the extent there is a conflict between the USD Stablecoin Agreement and the General Terms and Conditions, the terms of this USD Stablecoin Agreement shall govern and control. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the General Terms and Conditions.

1. PRELIMINARY PROVISIONS.

1.1. ABOUT OUR USD STABLECOINS.

1.1.1. Our USD Stablecoins are fully backed by an equivalent amount of U.S. Dollar-denominated assets with regulated financial institutions in segregated accounts apart from our corporate funds, on behalf of, and for the benefit of, Customer Token Holders and Non-Customer Token Holders (as defined below).  For every USD Stablecoin issued by us and remaining in circulation, Paxos will hold on behalf of Customer Token Holders and Non-Customer Token Holders either one U.S. Dollar or an equivalent amount of permitted USD-denominated assets in segregated accounts.  Our USD Stablecoins are not designed to create returns or profits for holders, increase in value, or otherwise accrue financial benefit to the Customer Token Holders and Non-Customer Token Holders.

1.2 DEFINITIONS.

1.2.1. “Customer Token Holder” means any Customer (as defined in the General Terms and Conditions) that does, or intends to, purchase, sell, convert, redeem, hold or transfer USD Stablecoins.

1.2.2. “Non-Customer Token Holder” means anyone that is not a Customer (as defined in the General Terms and Conditions) that purchases, sells or holds USD Stablecoins including anyone that does not purchase, sell or hold USD Stablecoin via the Paxos Platform.

1.3. DISCLAIMER; RISK FACTORS.

1.3.1. Blockchain protocols on which the USD Stablecoins are available may experience backlogs, higher than normal transaction fees, changes to the network, failure or a fork in the protocol. We do not own or control any blockchains protocols, are not responsible for the operation of blockchain networks and make no guarantees regarding any blockchain network’s security, functionality, or availability.

1.3.2. Because USD Stablecoins can be either ERC20 or SPL tokens, they may be compatible with software or other technology provided by a third-party. Paxos does not guarantee the security or functionality of any third-party software or technology and is not responsible for any losses of USD Stablecoins due to the failure of third-party software or technology.

1.3.3. The terms related to Illegal Activity apply to all USD Stablecoins (whether held by Customer Token Holders or Non-Customer Token Holders) and are hereby incorporated by reference into these USD Stablecoin Terms and Conditions.

1.3.4. Services related to specific USD Stablecoins (such as the ability to purchase, sell, convert, redeem or transfer a USD Stablecoin) may not be available to a User based on where they reside or to a Customer based on the Paxos entity they registered with.

1.3.5. Please also review the General Terms and Conditions for additional risk factors.

2. CUSTOMER TOKEN HOLDER-ONLY TERMS.

2.1. APPLICATION.

2.1.1. This Section 2 applies only to Customer Token Holders and constitutes an addendum to the General Terms and Conditions. To the extent there is a conflict between the USD Stablecoin Agreement and the General Terms and Conditions, Section 2 of this USD Stablecoin Agreement shall govern and control. You must agree to all of the terms of this USD Stablecoin Agreement. If you do not agree to or accept all of the terms of this USD Stablecoin Agreement, please immediately discontinue access to, and use of, all Paxos services and products.

2.1.2. By agreeing to these USD Stablecoin Terms and Conditions, as a Customer Token Holder, you agree to be bound by the General Terms and Conditions and the rest of the Paxos Contractual Documentation, as applicable.

2.2. THE PAXOS PLATFORM.

2.2.1 The Paxos Platform is an online platform that allows Customers to acquire USD Stablecoins from Paxos for US dollars and redeem USD Stablecoins from Paxos for US dollars.

2.2.2. Only verified Customers may purchase USD Stablecoins from us or redeem USD Stablecoins from us. Paxos may prevent Customers from purchasing, redeeming, or otherwise accessing services related to specific USD Stablecoins depending on where they reside or the Paxos entity they registered with, as described in Section 1.3.4 of this USD Stablecoin Agreement. We may also refuse to issue USD Stablecoins to, or redeem USD Stablecoins from, a verified Customer in the event of any of the circumstances described in Section 12 of the General Terms and Conditions including, without limitation, where we believe that the issuance or redemption of USD Stablecoins would be contrary to applicable law or would otherwise expose us to legal liability. Paxos also reserves the right to suspend minting USD Stablecoins for any reason it deems necessary. Absent a reasonable justification not to redeem USD Stablecoins, and provided that you are a fully verified Customer of Paxos, your USD Stablecoins are freely redeemable, subject to the redemption minimums described herein.

2.3. WITHDRAWALS.

2.3.1. Customers may withdraw some or all of their US dollars from their Accounts at any time, upon request to us. US dollars will be transferred from the Customer’s Account with the Paxos Platform to the bank account designated by, and owned by, the Customer.

2.3.2. Paxos may impose withdrawal limits on your Account as per the Paxos User Guide (available at https://help.paxos.com).

2.3.3. Please note that any withdrawal of US dollars may be delayed as necessary to comply with applicable law and/or the Paxos Platform’s compliance program, including verification of customer identification and anti-money laundering procedures. Withdrawals may take up to two (2) days to complete, provided that larger withdrawals may take substantially longer to complete.

2.4. FUNDING YOUR ACCOUNT.

2.4.1. After creating your Account with Paxos, you will be able to fund your Account with US dollars.

2.4.2. You may fund your Account with US dollars transferred from your account(s) with financial institutions. Once we receive your funds and validate that they are from a bank account owned by you, we will credit your Account with those funds. Unless otherwise explicitly agreed by us in writing, if a US dollar deposit does not originate from a bank account owned by you, it will be rejected and returned immediately. US dollar deposits sent before 3 p.m. New York time will typically be credited to your Account on the same day or next business day. US dollar deposits may not be credited outside of normal banking hours. Transfer times are subject to bank holidays, the internal processes and jurisdiction of your bank, and the internal processes of our banks.

2.4.3. You represent and warrant that all funds that you transfer to us do not represent the proceeds of any criminal or fraudulent activity. You are not allowed to receive funds in your Account from a sender other than yourself, unless you receive specific prior approval otherwise from us. If we reasonably determine that you are not the owner of the funds in your Account, we reserve the right to dispose of those funds in accordance with applicable law and in our sole discretion, which may include returning the funds to the originator or to a charity of our choosing.

2.5. PURCHASING USD STABLECOINS.

PLEASE NOTE: BEGINNING ON FEBRUARY 21, 2023, YOU MAY NO LONGER PURCHASE BUSD FROM PAXOS OR WITHDRAW BUSD FROM YOUR ACCOUNT. THROUGH AT LEAST FEBRUARY 1, 2024, YOU MAY REDEEM YOUR BUSD FROM PAXOS SUBJECT TO THESE USD STABLECOIN TERMS AND CONDITIONS.

2.5.1. After your Account has been funded, you may begin to purchase USD Stablecoins with US dollars on a one-for-one basis, subject to the minimum purchase amount below. In order to receive USD Stablecoins, you must provide us with your blockchain public address.

2.5.2. Prior to the placement of a purchase order on the Paxos Platform, you will be required to review the following information: the amount of the purchase, the commission or fee (if any) to be charged by the Paxos Platform, and the blockchain address to which the USD Stablecoins will be sent. For more detailed instructions on how to be issued USD Stablecoins, please refer to https://help.paxos.com.

2.5.3. Once an issuance of USD Stablecoins has been executed and the appropriate assets have been credited and debited, the transaction may not be reversible.

2.5.4. Paxos may require a minimum amount for purchase, which may be updated from time to time, equal to the minimum wire fee charged by your bank for the transaction.

2.5.5. Once a purchase request has passed compliance checks, it will be processed according to the purchase schedule.  

2.5.6. Paxos may require a minimum amount for withdrawal, which may be updated from time to time.

2.5.7. Paxos may impose withdrawal limits on your Account as per the Paxos User Guide (available at https://help.paxos.com).

2.6. CANCELED ORDERS.

2.6.1. Paxos reserves the right to cancel or nullify orders in the event that the order contains a bug, mistake, or an actual or suspected breach of this USD Stablecoin Agreement or the Paxos Contractual Documentation.

2.7. REDEMPTION FROM USD STABLECOINS TO US DOLLARS.

PLEASE NOTE: BEGINNING ON FEBRUARY 21, 2023, YOU MAY NO LONGER PURCHASE BUSD FROM PAXOS OR WITHDRAW BUSD FROM YOUR ACCOUNT. THROUGH AT LEAST FEBRUARY 1, 2024, YOU MAY STILL REDEEM YOUR BUSD FROM PAXOS SUBJECT TO THESE USD STABLECOIN TERMS AND CONDITIONS. 

2.7.1. In order to redeem USD Stablecoins for US dollars through the Paxos Platform, you must have an Account. Your Account will have a unique redemption address for each type of USD Stablecoin to which you can send your respective USD Stablecoins. Upon sending your USD Stablecoins to your redemption address, Paxos will credit your Account a corresponding amount of US dollars.  For example, if you send 5 USDP to the identified redemption address, Paxos will credit your Account with 5 US dollars. ALL REDEMPTIONS WILL BE ON A ONE-FOR-ONE BASIS, NOTWITHSTANDING ANY CHANGE IN THE MARKET VALUE OF THE RESERVE ASSETS BACKING USD STABLECOINS.

2.7.2. All USD Stablecoins will be rounded down to the nearest US cent at redemption .

2.7.3. Paxos will make commercially reasonable efforts to redeem your USD Stablecoins quickly. It may take up to 1 business day for your Account balance to reflect the redemption. Once a redemption request has passed compliance checks, it will be processed according to the redemption schedule.

2.7.4. Paxos may require a minimum amount for redemption, which may be updated from time to time, equal to the minimum wire fee charged by your bank for the transaction.

2.8. FEES.

2.8.1. Fees on Issuance and Redemption.

2.8.1.1. An overview of our fees on purchasing and redemption is set forth at https://help.paxos.com or otherwise in the Pricing Supplement. In the event of a conflict between the Paxos User Guide and the Pricing Supplement, the Pricing Supplement will control.

2.8.1.2. We will apply a fee to reserves backing USD Stablecoins, and you agree to pay us such fee as determined by an appropriate market rate, provided that no fee will be imposed that reduces the USD Stablecoin reserves to below the amount of USD Stablecoins outstanding. 

2.8.2. Banking Fees.

2.8.2.1. Paxos will not charge you fees for redeeming USD Stablecoins. Your financial institution and/or the provider of your crypto asset wallet may charge transaction and other fees related to the transfer of funds to your Account. To the extent Paxos is charged any banking fees by your financial institution or Paxos’s financial institution for the deposit or withdrawal of US dollars to or from your Account, Paxos will deduct an amount equal to any such fees from the amount being transferred.

2.8.3. Additional Fees for Certain Accounts.

2.8.3.1. Due to the cost of maintaining and supporting your Account and subject to applicable law, you will incur a monthly charge of two US dollars (US $2.00) if you maintain a non-zero balance and there has been no purchase or redemption activity on the Account for twelve months or longer. Such fee will be auto-debited from your account on a periodic basis in US dollars.

2.8.4. Certain Incentive Fees.

2.8.4.1. Paxos may offer incentives or reduced fees to certain clients at its sole discretion.

2.8.5. Right to Change Fees and Fee Structure.

2.8.5.1. We reserve the right to change or modify our fee structure or increase any of our fees at any time and from time to time. Any such changes, modifications or increases will be effective upon posting on our Site or an updated Pricing Supplement, subject to any requirement under applicable law to provide additional notice. Your first use of your Account following the posting on the Site of any changes to the fees will constitute your acceptance of such changes. If you do not agree to the posted changes, you may close your Account as provided in this Agreement.

3. CUSTOMER TOKEN HOLDER AND NON-CUSTOMER TOKEN HOLDER TERMS. This Section 3 applies to all purchasers, sellers and holders of USD Stablecoin, including both Customer Token Holders and Non-Customer Token Holders. If you do not agree to or accept all of the terms of this Section 3, please immediately discontinue access to, and use of, all elements of the Paxos Platform.

3.1. USD STABLECOINS.

3.1.1. USD Stablecoins may be issued by Paxos Trust, Paxos Digital, or another Paxos entity. Paxos Trust issues USDP, PYUSD and BUSD. Paxos Digital issues USDG. USD Stablecoin tokens are not money or legal tender and are not monetary instruments. Once you have USD Stablecoin tokens, you can transfer them, trade them, keep them, use them to pay persons that will accept USD Stablecoins, or redeem them for U.S. dollars from your Account, subject to the limitations below.

3.1.2. USD Stablecoin tokens issued by Paxos Trust are fully backed by US dollars held by Paxos Trust on USD Stablecoin customers’ behalf in segregated custodial accounts with US banks, or by debt instruments that are expressly guaranteed by the full faith and credit of the United States Government, by reverse repurchase agreements collateralized by such debt instruments and/or money-market funds composed of such debt instruments (collectively, “Debt Instruments”) specifically held for the benefit of USD Stablecoin customers, as further described in Section 3.2 below. The US dollars used to purchase USD Stablecoins are deposited either in US, FDIC-insured depository banks or used to purchase Debt Instruments, as described below, to maintain a one-to-one ratio of each USD Stablecoin to the amount of US dollar deposits or the face amount of Debt Instruments. For example, if you purchase five USDP with five US dollars, Paxos Trust will hold in custody for the benefit of USDP customers those five US dollars in a bank account or via the face value of Debt Instruments to support the five USDP in circulation.  USD Stablecoin tokens issued by Paxos Digital are fully backed by US dollars held by Paxos Digital on USD Stablecoin customers’ behalf in segregated custodial bank accounts, or by Debt Instruments specifically held for the benefit of USD Stablecoin customers, as further described in Section 3.2 below. The US dollars used to purchase USD Stablecoins are deposited in custodian banks or used to purchase Debt Instruments to maintain a one-to-one ratio of each USD Stablecoin to the amount of US dollar deposits or the face amount of Debt Instruments. For example, if you purchase five USDG with five US dollars, Paxos Digital will hold in custody for the benefit of USDG holders those five US dollars in a segregated bank account or via the face value of Debt Instruments to support the five USDG in circulation.

3.1.3. The USD Stablecoins can be either ERC20 and SPL tokens on the public blockchains. Because of this, USD Stablecoins may be compatible with existing third-party software that supports ERC20 and SPL tokens.

3.1.4. Paxos may, at its sole discretion, engage market makers to provide liquidity for USD Stablecoin markets, both on the Trading Platform and on third-party platforms.

3.1.5. Paxos Trust issues USD Stablecoins pursuant to specific approval from the New York Department of Financial Services (the “NYDFS”). Paxos Digital issues USD Stablecoins pursuant to its Major Payment Institution license as a stablecoin issuer, issued by the Monetary Authority of Singapore (the “MAS”).

3.1.6. Subject to Section 1.3.4. of this USD Stablecoin Agreement, USD Stablecoins are available on the Trading Platform for trading, for custody with Paxos, and for withdrawal. USD Stablecoins issued by Paxos Trust were approved for customers of Paxos Trust through specific approval from the NYDFS. USD Stablecoins issued by Paxos Digital were approved for customers of Paxos Digital through specific approval from the MAS.

3.1.7. Paxos Digital serves as a reseller of USD Stablecoins issued by Paxos Trust.

3.1.8. Paxos may offer financial incentives, rewards, or other forms of compensation to third-party partners for promoting, listing, or recommending the USD Stablecoins to their users. Such incentives are designed to enhance the distribution and awareness of the USD Stablecoins and do not influence the quality, safety, or utility of the USD Stablecoins themselves. Users are encouraged to independently assess the appropriateness of the USD Stablecoins for their individual needs.

3.2. CASH MANAGEMENT.

3.2.1. Overview of Cash Backing USD Stablecoins.

3.2.1.1. Paxos Trust provides cash management for the US dollar deposits backing the USD Stablecoins so that each USD Stablecoin is backed by an equivalent amount of US dollar deposits or Debt Instruments. To achieve this, the US dollar deposits backing the USD Stablecoins are held in custody for benefit of stablecoin holders only in one or more of the following forms: (i) fiat currency held in FDIC-insured bank accounts; (ii) (a) direct investments (including through repurchase agreements) in debt instruments that are expressly guaranteed by the full faith and credit of the United States Government; and/or (b) money-market funds composed of such debt instruments; and (iii) fiat currency held at FDIC-insured banks in excess of FDIC-insured limits, only to the extent that Paxos in its reasonable discretion believes that such funds need to remain liquid and readily available to service customers and that option 3.2.1.1.ii. is therefore impracticable. Paxos Trust Company may modify its cash management program from time to time, provided that the US dollars will always be held in segregated accounts in one of the three forms described above. Paxos Digital provides cash management for the US dollar deposits backing the USD Stablecoins it issues so that each USD Stablecoin is backed by an equivalent amount of US dollar deposits or US dollar-denominated Debt Instruments.  To achieve this, the US dollar deposits backing the USD Stablecoins are held in custody by Paxos Digital only in one or more of the following forms: (i) fiat currency held in financial institutions licensed for custodial services in Singapore by MAS or overseas-based custodians with minimum credit rating of “A-” which have a branch in Singapore and are regulated by MAS to provide custodial services; or (ii) (a) direct investments (including through repurchase agreements) in debt instruments that are expressly guaranteed by the full faith and credit of the United States Government; and/or (b) money-market funds composed of such debt instruments. Paxos Digital may modify its cash management program from time to time, provided that the US dollars will always be held in segregated accounts in one of the forms described above.

3.2.2. Coverage.

3.2.2.1. Each fiat cash depository account is (i) custodied by Paxos Trust or Paxos Digital in our name and under our control, (ii) separate from our business and operating bank accounts, and (iii) established specifically for the benefit of Customer Token Holders and Non-Customer Token Holders. The U.S. depository accounts that holds fiat cash are protected by FDIC insurance up to $250,000 for each account ownership category.  In order to obtain additional FDIC insurance coverage, Paxos may utilize deposit placement networks.  For the avoidance of doubt, USD Stablecoins themselves are not FDIC insured.

3.2.2.2. A list identifying deposit placement networks Paxos may use and their network banks can be found here.   

3.2.2.3. Paxos may exclude particular insured depository institutions within each network from eligibility to receive funds.

3.2.2.4. A list of banks where FDIC insured deposits may also be held can be found in the FDIC Pass Through Insurance Disclosures.

3.2.2.5. Further, Paxos may from time to time obtain private uninsured deposit insurance. Not all deposits are covered by the FDIC or private insurance, and Paxos may still incur losses in the event of a bank insolvency.

3.2.2.6. In addition to the deposit placement network described above, US dollars backing the USD Stablecoins may be invested in Debt Instruments.

3.2.3. Pass-Through Insurance Option.

3.2.3.1. For USD Stablecoins issued by Paxos Trust, you may elect to “opt in” to obtain FDIC “pass-through” deposit insurance for the portion of the reserve account backing your USD Stablecoins represented by fiat cash maintained at insured banks that separately insures you up to the applicable FDIC deposit insurance limits. FDIC insurance protects you against loss from the failure of the insured bank in which deposits are placed; it does not protect you against an insolvency of Paxos. Your assets held with Paxos Trust are held bankruptcy remote under New York banking law, and thus in the event of Paxos Trust’s insolvency, your assets would not be used to satisfy the debts of Paxos Trust. The portions of the reserve account held in U.S. Treasury bills (or money-market funds invested in the same) are not insured and that portion of reserves underlying your USD Stablecoins is therefore not eligible for “pass-through” deposit insurance. We may choose to allocate funds among reserve assets at our discretion, which will affect the extent to which FDIC pass-through insurance will apply to funds held for your benefit. For more information about FDIC pass-through insurance, please see here.

3.2.3.2. If you complete the opt-in registration and comply with all other terms and conditions, Paxos agrees to maintain records showing your interest in the fiat cash reserves held in deposit at insured banks. Assuming the foregoing conditions are met, the FDIC may provide pass-through deposit insurance coverage on fiat cash deposits at insured banks in an amount corresponding to the portion representing your funds in these deposit accounts, together with avvny other deposits you hold at the same insured bank in the same ownership capacity, so long as you can prove that these funds are owned by you in a manner satisfactory to the FDIC and you meet other requirements necessary for FDIC pass through insurance coverage. 

3.2.3.3. We have provided the opt-in registration so that we can maintain the records necessary to confirm your identity and indirect ownership interest in the deposits at insured banks in the custodial account in a manner reasonably designed to satisfy the FDIC’s requirements for obtaining pass-through deposit insurance coverage.  Your verification of your ownership of the USD Stablecoins and the equivalent balance of funds in the custodial account is essential. 

3.2.3.4. Opting in as set forth in this Section 3.2.3 does not ensure FDIC insurance coverage. The actual amount of any pass-through insurance will also depend on whether you have any other insured-deposits held by the particular bank holding the fiat reserves since a depositor is only eligible for up to $250,000 in FDIC-insurance coverage per each insured bank for all deposit accounts held in your name or on your behalf in the same capacity per each insured bank.

3.2.3.5. As stated in Section 3.2.2.6, not all reserves backing USD Stablecoins are held in FDIC insured accounts. Please refer to https://paxos.com/regulation-and-transparency/ for further information on the reserves backing USD Stablecoins.

3.2.3.6. If we are unable to verify your ownership of the USD Stablecoins, either because you hold the USD Stablecoins in an omnibus account with others (such as at a trading platform or exchange) or otherwise, we will not be able to provide you this opt-in registration. Once you transfer the USD Stablecoins from the wallet(s) identified to us during the opt-in registration to another wallet (even if owned by you), Paxos is not responsible for taking any action to make FDIC insurance available on a pass-through basis for the funds backing that USD Stablecoins and makes no representations about the availability of FDIC insurance for such funds.

3.2.3.7. IF YOU DO NOT OPT IN AND YOU ARE A NON-CUSTOMER TOKEN HOLDER, “PASS-THROUGH” DEPOSIT INSURANCE WILL NOT BE AVAILABLE TO YOU DIRECTLY THROUGH PAXOS ON DEPOSITS BACKING YOUR USD STABLECOINS.

For more information on this option, please reach out to help.paxos.com.

3.3. FORKS.

3.3.1. You understand, acknowledge and agree that the underlying operating rules of blockchain protocols may change from time to time in such a way as to result in a Fork (as defined in the Trading Platform Terms and Conditions). If a Fork occurs, it may result in the creation of a new branch of a blockchain. Paxos will evaluate all forks and make a determination, based on a number of factors, to support each USD Stablecoin on one, and only one, of the Forks. Paxos will continue to provide Services for, support and hold US dollars against, USD Stablecoins held on the supported Fork only.

3.3.2. If a Fork occurs, you understand, acknowledge and agree that we may temporarily suspend the operations of the Paxos Platform.

3.4. UPGRADES AND FREEZES.

3.4.1. As part of the ERC20 and SPL smart contract and as part of the Services, Paxos has the ability and the right to freeze and upgrade all USD Stablecoins tokens (on an aggregate basis), regardless of where the USD Stablecoins are being held. Paxos will make commercially reasonable efforts to provide prior notice of any material freeze or upgrade and inform holders of USD Stablecoins of the reasons and consequences of such freeze and/or upgrade. Paxos will make commercially reasonable efforts to use the freeze and/or upgrade feature only under limited circumstances. 

3.4.2. Paxos must comply with any legal directive to freeze, temporarily or permanently, user access to the USD Stablecoins or the US dollars backing your USD Stablecoins with or without advance notice. Paxos will only freeze such assets (1) if required to do so by law, specifically when Paxos receives a formal legal directive from a regulator, judicial body, law enforcement agency, or other legal entity having jurisdiction over Paxos, (2) pursuant to a formal notification by a Paxos partner according to previously agreed contractual terms, or (3) as deemed necessary by Paxos in its sole discretion. Legal directive formats include court-ordered subpoenas, national security letters, and formal written directives from a regulator with oversight over Paxos.

3.4.3. Your USD Stablecoins and the US dollars backing your USD Stablecoins may be subject to seizure or forfeiture by formal written legal directive from a regulator, judicial body, law enforcement agency, or other legal entity having jurisdiction over Paxos, and we will comply with the legal process in respect thereof. Seizure may not occur under any circumstances absent such a binding legal directive. If tokens are seized, the Paxos transaction generation will ensure that the seized funds are sent to a segregated wallet address held by Paxos for the purposes of seizure/forfeiture, until such time as they may be disposed of or otherwise handled as required by law.

3.4.4. If we determine after investigation that any of your USD Stablecoins have been used, or are being used, for illegal (or sanctioned) activity, we may not permit you to redeem your USD Stablecoins for US dollars from Paxos, and, if presented for redemption, such USD Stablecoins and the US dollars backing such USD Stablecoins may be forfeited.

3.4.5. Any USD Stablecoins or fiat currency underlying the USD Stablecoins that are subject to freeze, seizure, forfeiture or similar limitation on their use imposed by law may become wholly and permanently unrecoverable and unusable, and in appropriate circumstances, may be destroyed. If tokens are seized, the Paxos transaction generation will ensure that the seized funds are sent to a segregated wallet address held by Paxos for the purposes of seizure/forfeiture, until such time as they may be disposed of or otherwise handled as required by law.

3.4.6. This Section 3.4 applies to all holders of USD Stablecoins, regardless of whether the holder is a Customer of Paxos.

3.4.7. By using our USD Stablecoins, you agree that we may take the actions set forth above and that we will not be liable to you therefore.

3.4.8. If you are aware of improper conduct involving a Paxos supported asset backed token, you should immediately contact Paxos at [email protected], as well as law enforcement to work towards filing a law enforcement report. Paxos will make reasonable effort to cooperate with law enforcement inquiries and assist with investigations pertaining to Paxos supported asset backed tokens.

3.4.9. Law enforcement may submit information requests to [email protected] 

3.5. ILLEGAL USE OF USD STABLECOINS.

WE MAY FREEZE, TEMPORARILY OR PERMANENTLY, YOUR USE OF, AND ACCESS TO, USD STABLECOINS OR THE US DOLLARS BACKING YOUR USD STABLECOINS, WITH OR WITHOUT ADVANCE NOTICE.

YOUR USD STABLECOINS AND THE US DOLLARS BACKING YOUR USD STABLECOINS MAY BE SUBJECT TO SEIZURE OR FORFEITURE BY LAW ENFORCEMENT, AND WE WILL COMPLY WITH LEGAL PROCESS IN RESPECT THEREOF.

IF WE DETERMINE AFTER INVESTIGATION THAT ANY OF YOUR USD STABLECOINS HAVE BEEN USED, OR ARE BEING USED, FOR ILLEGAL (OR SANCTIONED) ACTIVITY, WE MAY NOT PERMIT YOU TO REDEEM YOUR USD STABLECOINS FOR US DOLLARS FROM PAXOS, AND, IF PRESENTED FOR REDEMPTION, SUCH USD STABLECOINS AND THE US DOLLARS BACKING SUCH USD STABLECOINS MAY BE FORFEITED.

ANY USD STABLECOINS OR FIAT CURRENCY UNDERLYING USD STABLECOINS THAT ARE SUBJECT TO FREEZE, SEIZURE, FORFEITURE OR SIMILAR LIMITATION ON THEIR USE IMPOSED BY LAW MAY BECOME WHOLLY AND PERMANENTLY UNRECOVERABLE AND UNUSABLE, AND IN APPROPRIATE CIRCUMSTANCES, MAY BE DESTROYED.

THIS SECTION 3.5 APPLIES TO ALL HOLDERS, REGARDLESS OF WHETHER THE HOLDER IS A CUSTOMER OF PAXOS.

BY USING USD STABLECOINS, YOU AGREE THAT WE MAY TAKE THE ACTIONS SET FORTH IN THIS SECTION 3.5 AND THAT WE WILL NOT BE LIABLE TO YOU AS A RESULT.