New York State Releases Guidance For Issuing Dollar-Backed Stablecoins

New York State Department of Financial Services (DFS) on Wednesday, announced regulatory advice regarding US dollar-backed stablecoins issued by DFS-regulated firms.

iexclusivenews reports that according to a DFS statement, it is the first US authority to enforce such requirements on a stablecoin issuer. 

This online news outlet understands that the advice specifies standards for redeemability, reserves, and attestation.

They stipulate that a stablecoin must be completely backed by reserves at the end of each business day And the issuer must have a redemption policy authorized in advance in writing by the DFS. Which offers the holder the ability to redeem the stablecoin for US dollars. 

Furthermore, the issuer’s reserves must be kept separate from its proprietary assets and consist of US Treasury securities or deposits at the state or federally regulated banks. A professional public accountant must audit the reserve on a regular basis. 

Related: New Japanese Law May Allow Seizure Of Stolen Crypto 

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What You Should Know

The recommendation only applies to DFS-regulated issuers and limited-purpose trust charter holders operating in the state. At the moment, these are the Paxos Trust Company. Which issues the Pax Dollar (USDP) and the Binance USD (BUSD); the Gemini Trust Company. That issues the Gemini Dollar (GUSD); and the GMO-Z.com Trust Company, which issues the Zytara Dollar (ZUSD). Other stablecoins that may be listed by DFS-regulated institutions are not covered by the advice. 

The DFS license, known as the New York state BitLicense, is notoriously difficult to get and has drawn criticism from New York City Mayor Eric Adams. When it was first established in 2015, some crypto companies relocated out of the state. 

Meanwhile, iexclusivenews Nigeria reports that as part of its commitment to “eliminate delays in regulatory processes and guarantee operational excellence across the Virtual Currency business,” the DFS plans to treble the size of its virtual currency staff this year.