The New York Department of Financial Services (DFS) has issued a new set of guidelines for cryptocurrency firms regulated with BitLicense, which issue USD-backed stablecoins.
Stablecoin Regulation for BitLicense Companies
According to the New York regulator, the new rules published on Wednesday (June 8, 2022) seek to emphasize certain requirements that apply to dollar-pegged stablecoins issued by DFS-regulated entities. Guidance focuses on support and repayments, reserve requirements and independent audits.
For backing and redeemability, the DFS stated that stablecoins should be backed by a repository of assets. In addition, issuers must have clear redemption policies approved by the New York watchdog and must separate assets in reserves from their owned holdings.
Reserve assets must include U.S. Treasury bills, reverse repurchased entirely by such bills, notes or bonds as collateral.
In addition, assets in the reserve “must be in custody with U.S. state or federal chartered depository institutions and/or asset custodians.” The guideline also stipulates that reserves must undergo a monthly audit by an independent Certified Public Accountant (CPA) licensed by the United States.
Meanwhile, the DFS said the rules do not limit the regulator’s power. An excerpt from the guideline states:
“DFS may, at any time and in its sole discretion, restrict or otherwise limit the issuance or use of stablecoins before or after a DFS-regulated issuer begins to issue stablecoins and may require that such Any issuer may delist, withhold, or otherwise limit or deduct activity in respect of any stable currency.”
According to a statement from New York State DFS Superintendent Adrienne A. Harris:
“Leveraging our years of expertise in space, our regulatory guidance today creates clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York City.”
More countries keen on stablecoin framework
Regulators in various jurisdictions, especially the United States, are working towards regulating the stablecoin market. But it seems that the need for a stablecoin regulatory framework has intensified following the collapse of Terra (LUNA) and UST.
The UK government recently proposed some amendments to existing regulations that would reduce the risks associated with failed stablecoin projects. SEC Commissioner Hester Pearce also said there could be a quick push for stablecoin guidance.
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