The NY State Department of Financial Services, notorious for its strictness, claims to be the first regulator in the country to impose requirements of the type.
The New York State Department of Financial Services (DFS) on Wednesday released regulatory guidance for U.S. dollar-backed stablecoins issued by DFS-regulated entities. According to a DFS statement, it is the first regulator in the United States to impose such expectations on a stablecoin issuer.
The requirements in the guidance concern redeemability, reserves and attestation. They state that a stablecoin must be fully backed by reserves as of the end of every business day and the issuer must have a redemption policy approved in advance in writing by the DFS that gives the holder the right to redeem the stablecoin for U.S. dollars.
Furthermore, the issuer’s reserves must be segregated from its proprietary assets and consist of U.S. Treasury instruments or deposits at state or federally chartered institutions. The reserve must be subjected to monthly examination by a certified public accountant.
The guidance applies only to issuers regulated by the DFS and limited purpose trust charter holders operating in the state. At present, they are the Paxos Trust Company, issuer of the Pax Dollar (USDP) and Binance USD (BUSD); Gemini Trust Company, issuer of the Gemini Dollar (GUSD); and GMO-Z.com Trust Company, issuer of the Zytara Dollar (ZUSD). The guidance does not apply to other stablecoins that may be listed by DFS-regulated entities.
The New York state BitLicense, as the DFS license is known, is notoriously difficult to obtain and has come under criticism from New York City Mayor Eric Adams. Some crypto firms moved out of the state when it was introduced in 2015. The DFS intends to triple the size of its virtual currency team this year as part of its program to “address delays in regulatory processes and ensure operational excellence across the Virtual Currency unit.”