The New York State Department of Financial Services (DFS) has issued guidance on the regulation of U.S. dollar-linked stablecoins in the wake of the Terra collapse.
The DFS regulations reflect the “basic criteria” for securing and redeeming the ability to redeem stablecoins, and set out the agency’s expectations for stablecoin reserves and independent audits.
DFS Superintendent Adrienne Harris said the document “creates clear criteria for cryptocurrency services companies that intend to act as issuers of New York dollar-secured stablecoins.”
The regulations state that any stablecoin “must be fully collateralized by a reserve of assets” for the day. Companies issuing stablecoins are required to lay down a “clear, obvious redemption policy,” approved in advance in writing by the DFS, that would entitle the owner of the stablecoin to redeem it “in a timely manner at par for the U.S. dollar.”
In addition, stablecoin operators are required to segregate the capital of reserves from their assets and hold them “at state or federal U.S. depository institutions and/or asset custodians.”
Reserves are required to be held in such asset categories as U.S. Treasury bills, repurchase agreements, fully collateralized U.S. Treasury bills, and deposit accounts at state or federal depository institutions in the United States.
Reserves backing Stablecoins are subject to a monthly and annual independent audit by a U.S. licensed certified public accountant (CPA).
The rules state that they apply only to DFS-regulated stablecoin issuers and holders of limited purpose trust charters operating in New York State.
They now include Paxos Trust Company, a Pax dollar issuer (USDP); Binance USD, a Binance dollar issuer (BUSD); Gemini Trust Company, a Gemini dollar issuer (GUSD) and GMO-Z. com Trust Company, issuer of Zytara Dollar (ZUSD). As a reminder, the New York Senate recently approved a ban on mining on the PoW algorithm.