New York State Department of Financial Services has issued new regulatory guidance on setting foundational criteria for USD-backed stablecoins.
The guidance was issued by the DFS’ Superintendent Adrienne Harris will focus on USD-backed stablecoins issued by DFS-regulated entities.
According to the New York’s DFS, the new regulatory guidance will address a number of key matters including firstly, backing redeemability. The Department claims 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 stablecoins as of the end of each business day.
The DFS added, “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.â€
Another key part of the guidance includes reserve requirements. 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 reserve must also consist of US Treasury Bills acquired by the issuer three months or less from their respective maturities, reserve repurchase agreements fully collateralised by US Treasury bills, US Treasury notes and/or US Treasury bonds on an overnight basis, as well as deposit accounts at US state or federally chartered depository institutions, subject to DFS-approved restrictions.
The regulatory guidance will also look deeper into independent audits. The reserve, the DFS said, must be subject to an examination of management’s assertions at least once per month by an independent certified public accountant licensed in the US.
Harris said, “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.â€
The Hong Kong Monetary Authority (HKMA) has called for the regulation of fiat-currency backed stablecoins similar to that of banks.
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