The New York Department of Financial Services (DFS) has issued a new set of criteria for BitLicense-registered cryptocurrency companies that produce dollar-backed stablecoins.
BitLicense companies must follow stablecoin regulations
The new guidelines, which were released on Wednesday (June 8, 2022), aim to underline certain standards that apply to dollar-pegged stablecoins issued by DFS-regulated firms, according to the New York regulator. Backing and redeemability, reserve requirements, and independent audits are all included in the guidance.
Stablecoins should be backed by a reserve of assets for backing and redeemability, according to the DFS. In addition, the issuer must have clear redemption policies that have been approved by the New York watchdog, and assets in the reserve must be kept separate from the issuer’s own holdings.
The reserve’s assets should be U.S. Treasury Bills, reverse repurchases fully collateralized by such bills, notes, or bonds, and reverse repurchases fully collateralized by such bills, notes, or bonds.
Assets in the reserve “shall be held in custody with U.S. state or federally chart ered depository institutions and/or asset custodians,” according to the regulations. The guidelines further state that the reserves must be audited on a regular basis by an independent Certified Public Accountant licensed in the United States (CPA).
New York Department of Financial Services noted that the rules do not limit the power of the regulator
An excerpt from the guideline said:
“DFS may, at any time and in its sole discretion, prohibit or otherwise limit a stablecoin’s issuance or use before or after a DFS-regulated Issuer begins issuing the stablecoin and may require that any such Issuer delist, halt, or otherwise limit or curtail activity with respect to any stablecoin.”
According to a statement from New York State DFS Superintendent Adrienne A. Harris:
“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.”
More countries are interested in establishing a stablecoin framework
Regulators in several jurisdictions have been seeking to regulate the stablecoin sector, particularly in the United States. However, following the collapse of Terra (LUNA) and UST, the necessity for a stablecoin regulatory framework appears to have grown even more urgent.
The government of the United Kingdom recently proposed several changes to existing regulations in order to reduce the risks connected with unsuccessful stablecoin projects. Commissioner Hester Peirce of the Securities and Exchange Commission also mentioned that stablecoin recommendations may be pushed through more quickly.
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