The state of New York is revealing an expansion of its stablecoin regulations, now requiring the dollar-pegged crypto assets to be backed fully by cash.
According to a new press release by the New York State Department of Financial Services (DFS), the state’s regulations are being updated to require stablecoin issuers to adopt clear redemption policies.
“The stablecoin must be fully backed by a reserve of assets, meaning that the market value of the reserve is at least equal to the nominal value of all outstanding units of the stablecoin as of the end of each business day.
The issuer of the stablecoin must adopt clear, conspicuous redemption policies, approved in advance by DFS in writing, that confer on any lawful holder of the stablecoin a right to redeem units of the stablecoin from the issuer in a timely fashion at par for the US dollar.”
The update also issues guidelines on the reserve requirements for stablecoins, mandating that they be backed by either U.S. Treasury bills acquired from the stablecoin issuer three months or less from their maturity dates or reverse repurchase agreements collateralized by DFS-approved U.S. Treasury bills, notes or bonds.
In addition, the new regulations require the reserve assets to be kept separately from the proprietary assets of the stablecoin issuer.
“The assets in the reserve must be segregated from the proprietary assets of the issuing entity and must be held in custody with US state or federally chartered depository institutions and/or asset custodians.”
The rules change would also establish once-per-month audits by certified accountants to ensure accuracy.
As stated by New York DFS Superintendent Adrienne Harris,
“Since DFS approved the first USD-backed stablecoins for issuance in New York in 2018, our regulated entities have had to meet conservative reserve requirements and provide routine attestations to protect consumers and ensure the stability of the coins issued.
Leveraging our years of expertise in the space, our Regulatory Guidance today creates clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York.”
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