New York Regulator Issues Guidelines for Dollar-backed Stablecoins

On June 9th, the New York State Department of Financial Services (NYDFS) issued new regulatory guidance for stablecoins. In May, the U.S. Senate introduced the Stable coin TRUST Act that would force stablecoin issuers to comply with specific rules, and regulate USD-pegged stable coins with a commitment to financial privacy.

The new guidance issued by the NYDFS is in line with the Act, which sets some basic criteria for dollar-backed stablecoins, including that must be backed by a reserve of assets, which come in four forms: U.S. Treasury bills with no more than three months, a reverse repurchase agreement backed by U.S. Treasury bills, U.S. Treasury bonds or Treasury bills, and deposit accounts at U.S. state. Asset reserves must be audited monthly by independent certified public accountants and should be segregated from the exclusive assets of the issuing entity.

In addition, the market value of the stable coins should be at least equal to the market value of unconverted stablecoins at the end of each day. The NYDFS also requires issuers of stable coins to adopt clear, visible redemption policies, with prior approval that allows investors to redeem stable coins from the issuers in a timely manner.