New York Finance Regulator Issues Fresh Guidance on Dollar-Backed Stablecoins

By Matt Brienen

Published: 2022-06-09T18:53:55+00:00

The New York State Department of Financial Services (DFS) released first-of-its-kind regulatory guidance for entities issuing U.S. dollar-backed stablecoins.

The guidance outlines the “baseline criteria” for backing and redeemability of stablecoins and sets up the department’s expectations in relation to stablecoin reserves and independent audits.

According to Superintendent Adrienne Harris, it “creates clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York.”

More specifically, the document states that any stablecoin “must be fully backed by a reserve of assets” at the end of every business day. Stablecoin issuers, in turn, are required to have “clear, conspicuous redemption policies” approved in advance in writing by the DFS that would give a stablecoin holder the right to redeem it “in a timely fashion at par for the U.S. dollar.”

Furthermore, the stablecoin operators are required to separate the assets in their reserves from their proprietary assets, as well as custody them “with U.S. state or federally chartered depository institutions and/or asset custodians.”

The reserves must be held in asset categories such as U.S. Treasury bills, reverse repurchase agreements fully collateralized by U.S treasury bills, notes, as well as deposit accounts at U.S. state or federally chartered depository institutions.

The reserves backing the stablecoins are also subject to independent audits conducted by a U.S.-licensed Certified Public Accountant (CPA) on a monthly and yearly basis.

The guidance specifies that it applies only to stablecoin issuers regulated by the DFS and limited purpose trust charter holders operating in the state of New York.

Currently, these include the Paxos Trust Company, the issuer of the Pax Dollar (USDP), Binance USD, the issuer of the Binance USD (BUSD), Gemini Trust Company, the issuer of the Gemini Dollar (GUSD), and GMO-Z.com Trust Company, the issuer of the Zytara Dollar (ZUSD).

Furthermore, the stablecoin operators are required to separate the assets in their reserves from their proprietary assets, as well as custody them “with U.S. state or federally chartered depository institutions and/or asset custodians.”

The reserves must be held in asset categories such as U.S. Treasury bills, reverse repurchase agreements fully collateralized by U.S treasury bills, notes, as well as deposit accounts at U.S. state or federally chartered depository institutions.

The reserves backing the stablecoins are also subject to independent audits conducted by a U.S.-licensed Certified Public Accountant (CPA) on a monthly and yearly basis.

The guidance specifies that it applies only to stablecoin issuers regulated by the DFS and limited purpose trust charter holders operating in the state of New York.

Currently, these include the Paxos Trust Company, the issuer of the Pax Dollar (USDP), Binance USD, the issuer of the Binance USD (BUSD), Gemini Trust Company, the issuer of the Gemini Dollar (GUSD), and GMO-Z.com Trust Company, the issuer of the Zytara Dollar (ZUSD).

Furthermore, the stablecoin operators are required to separate the assets in their reserves from their proprietary assets, as well as custody them “with U.S. state or federally chartered depository institutions and/or asset custodians.”

The reserves must be held in asset categories such as U.S. Treasury bills, reverse repurchase agreements fully collateralized by U.S treasury bills, notes, as well as deposit accounts at U.S. state or federally chartered depository institutions.

The reserves backing the stablecoins are also subject to independent audits conducted by a U.S.-licensed Certified Public Accountant (CPA) on a monthly and yearly basis.

The guidance specifies that it applies only to stablecoin issuers regulated by the DFS and limited purpose trust charter holders operating in the state of New York.

Currently, these include the Paxos Trust Company, the issuer of the Pax Dollar (USDP), Binance USD, the issuer of the Binance USD (BUSD), Gemini Trust Company, the issuer of the Gemini Dollar (GUSD), and GMO-Z.com Trust Company, the issuer of the Zytara Dollar (ZUSD).