The New York Department of Financial Services, which is known for its strictness, boasts that it is the first regulator to impose requirements of this nature.
The New York State Department of Financial Services (DFS) has released regulatory guidelines for any U.S. dollar-backed stablecoin that will be issued by DFS-regulated firms. According to the statement released by DFS, this is the first regulator in the nation to give such expectations.
The Requirements to Apply Only to Issuers Regulated Under DFS
The requirements mainly concern redeemability, attestation and reserves. They indicate that a stablecoin must be entirely backed by reserves at the end of the business day, and the issuer must craft a redemption policy that is approved by the DFS.
In addition, the reserves created by the issuer have to be segregated from proprietary assets and consist of the U.S. Treasury instruments/ deposits at a federal or state chartered institution. This reserve must also be subject to monthly review by a certified public accountant.
This guidance only applies to firms or stable coin issuers that are regulated by DFS and limited purpose trust charter holders operating in New York. At the moment, these issuers include Binance USD (BUSD), Paxos Trust Company, Gemini Trust Company, and GMO-Z.com Trust Company. However, these rules do not apply to stable coins listed by DFS-regulated entities.
The New York BitLicense is one of the most challenging to obtain and has come under sharp criticism by crypto enthusiasts, including Eric Adams, the city mayor. It was because of this license’s requirements that a number of crypto firms shifted from New York in 2015. DFS has indicated that it is targeting to triple its virtual currency team by the close of the year to address the delays in the regulatory process and drive operational excellence.