The New York State Department of Financial Services (DFS) on Wednesday released regulatory guidance for US dollar-backed stable currencies issued by DFS-regulated entities. According to according to a DFS statement, it is the first regulator in the United States to impose such expectations on a stability publisher.
The requirements in leadership care redemption, reservations and certification. They state that a stable currency must be fully backed by reserves from the end of each business day and the publisher must have a redemption policy approved in advance by the DFS, which gives the owner the right to redeem the stability for US dollars.
In addition, the issuer’s reserves must be separated from its proprietary assets and consist of U.S. fiscal instruments or deposits with state or federally chartered institutions. The reservation must be subject to a monthly examination by a certified public auditor.
Related: Do you have the right to redeem your stable currency?
The guidance applies only to issuers regulated by the DFS and limited trust charter holders operating in the state. Currently, they are the Paxos Trust Company, publisher of the Pax Dollar (USDP) and Binance USD (BUSD); Gemini Trust Company, publisher of the Gemini Dollar (GUSD); and GMO-Z.com Trust Company, publisher of the Zytara Dollar (ZUSD). The guide does not apply to other stable currencies that may be listed by DFS regulated entities.
The New York State BitLicense, as the DFS license is known, is notoriously difficult to obtain and has been criticized by New York City Mayor Eric Adams. Some crypto companies relocated from the state when it was introduced in 2015. The DFS intends triple the size of its virtual currency team this year as part of its program to “address delays in regulatory processes and ensure operational excellence across the Virtual Currency unit.”