New York issues new stablecoin guidelines that require the stablecoins to be fully backed by the issuer’s operational funds. The guidance released by the Department of Financial Services urges stablecoin issuers to meet reserve requirements and also conduct monthly audits.
The issuance follows a timeline of the visible decline of trust in stablecoins. Last month witnessed the fall of TerraUSD, the stablecoin that was supposed to stay stable. Since the incident, investors and regulators have kept an eagle’s eye on every stablecoin and the mere possibility that it might end up like UST.
“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.”
Adrienne A. Harris, Superintendent of DFS
A reserve of assets should fully back Stablecoins
The agency said that the stablecoins should be fully secured and backed by a reserve set of assets that are also redeemable by investors. The agency has laid down the requirements and also the types of assets to be held as reserves. The issuers are also required to submit monthly independent audits by an accountant.
“We’re now making it transparent and making clear to the marketplace that these are expectations for our stablecoin issuers across the board.”
Adrienne Harris
The DFS is considered the toughest regulator in New York. The license, called the BitLicense, was created in 2015 to regulate crypto businesses. The license is deemed to be extremely hard to get approved and has also been criticized by New York City Mayor Eric Adams.
Critics have commented that the stringent regulations are causing talents to move to other hubs for friendlier regulations. But Harris believes that having clear and rigorous regulations attracts companies and talents to New York. To date, there are 22 Bitlicensees, and DFS is envisioning tripling the size of its virtual currency team this year.