New York state issues guidance for dollar-backed stablecoins

New York State is the first US regulator to issue stablecoin guidance

Empire State Building is illuminated in green in Manhattan of New York City, US                                 
Under the new state rules, a stablecoin must be fully backed by a reserve of assets – Photo: Getty Images
                                

New York State’s Department of Financial Services (DFS) has issued regulatory guidance on criteria for USD-backed stablecoins issued by DFS-regulated entities.

The move was announced by DFS superintendent Adrienne Harris. The department is the first US financial regulator to lay down ground rules on stablecoins for the crypto industry.

Redeemability and reserves

The guidance addresses redeemability, reserves and attestation. On redeemability, a stablecoin must be fully backed by a reserve of assets. At the end of each day, the market value of the reserve asset must be at least equal to the nominal value of outstanding units of the stablecoin.

Additionally, the issuer of a stablecoin “must adopt clear, conspicuous redemption policies” that are approved in advance by the DFS.  

The requirements state that the reserve must be “segregated from the proprietary assets of the issuing entity and must be held in custody with US state or federally chartered depository institutions and asset custodians”.

The reserves must consist of either US Treasury bills, reverse repurchase agreements fully collateralised by US Treasury bills, US Treasury notes, or US Treasury bonds on an overnight basis.

The reserve must also be subject to an examination of management assertions at least once per month by an independent Certified Public Accountant (CPA) licenced in the US, while applying the attestation standards of the American Institute of Certified Public Accountants (AICPA).

‘Guidance creates clear criteria for virtual currency companies’

Superintendent Harris said: “Since DFS approved the first USD-backed stablecoins for issuance in New York in 2018, our regulated entities have had to meet conservative reserve requirements and provide routine attestations to protect consumers and ensure the stability of the coins issued.

“Leveraging our years of expertise in the space, our regulatory guidance today creates clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York.”

The regulatory guidance applies to DFS regulated stablecoins such as Pax Dollar (USDP), Binance USD (BUSD), Gemini Dollar (GUSD) and the GMO-Z.com Trust Company’s ZUSD (ZUSD).      

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image