The New York State Department of Financial Services (DFS) announced regulatory guidance for DFS-regulated firms issuing US dollar-backed stablecoins.
According to a statement from the Department of Financial Services, it is the first authority in the United States to place such demands on a stablecoin issuer.
The guidance specifies requirements for redeemability, reserves, and attestation. They stipulate that a stablecoin must be completely backed by reserves at the end of each business day and that the issuer must have a DFS-approved redemption mechanism that allows the holder to redeem the stablecoin for US dollars.
Furthermore, the issuer’s reserves must be kept separate from its proprietary assets and made up of US Treasury instruments or deposits at the state or federally regulated banks. A qualified public accountant must examine the reserve on a monthly basis.
Only issuers regulated by the DFS and limited purpose trust charter holders operating in the state are covered by the guidance.
The Paxos Trust Company, which issues the Pax Dollar (USDP) and the Binance USD (BUSD), the Gemini Trust Company, which issues the Gemini Dollar (GUSD), and the GMO-Z.com Trust Company, which issues the Zytara Dollar, are the current issuers (ZUSD). Other stablecoins that may be listed by DFS-regulated institutions are not covered by the guidance.
The DFS license, known as the BitLicense in New York, is notoriously difficult to obtain and has been chastised by New York City Mayor Eric Adams.
When it was first introduced in 2015, some crypto companies relocated out of the state. As part of a mission to “eliminate delays in regulatory processes and ensure operational excellence across the Virtual Currency business,” the DFS plans to treble the size of its virtual currency team this year.