The Department of Financial Services (DFS) of the state of New York has published a regulatory guideline for stablecoins backed by the US dollar. The regulatory guidelines will look into stablecoins issued by entities regulated by the DFS.
New York set to regulate stablecoins
The DFS statement said that the regulator was the first one within the United States to impose these expectations on the issuers of stablecoins. The requirements put forward by this agency revolve around a wide range of issues such as redeemability, attestation, and reserves.
The requirements say that a stablecoin needs to be fully backed by reserves. These reserves need to be replenished by the end of each business day, and the issuer needs to implement a redemption policy approved by the DFS in writing. The redemption policy will give the holder the right to redeem their stablecoins for US dollars.
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Moreover, the reserves given by the issuer need to be differentiated from the proprietary assets of the issuing company. They will also include instruments provided by the US Treasury or deposits given at federal and state-chartered institutions.
The reserves offered by the stablecoin issuer will also be subjected to a monthly review. The review will be conducted by a certified public accountant, ensuring that the stablecoin will be fully backed at all times.
Guidance applies to stablecoin issuers regulated by the DFS
The regulatory guidance will apply to the issuers regulated by the DFS and limited purpose trust charter holders working in the state. Currently, the DFS-regulated institutions include the Paxos Trust Company, which issues Pax Dollar (USDP), Binance USD (BUSD), Gemini Trust Company, which issues the Gemini Dollar (GUSD), and GMO-Z.com Trust Company which issues the Zytara Dollar (ZUSD).
The regulatory guidance will not apply to the other stablecoins listed by the DFS. The DFS license issued by the state of New York is also known as BitLicense. The license is very hard to obtain, and it has been criticized by the mayor of New York City, Eric Adams.
After introducing BitLicense, some firms announced they would migrate from the state. The DFS plans to increase its digital currency team by three times by the end of 2022. The move will allow the agency to “address delays in regulatory processes and ensure operational excellence across the Virtual Currency unit.”
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