Regulatory Body in New York Provides Guidance on Digital Currencies Known as Stablecoins
The New York Department of Financial Services (NYDFS) has taken a significant step towards ensuring the safety and soundness of the stablecoin market. The department has issued its first stablecoin-specific guidance, requiring stablecoin issuers operating in New York to abide by a series of demands outlined in the guidance.
The new guidance follows the Terra fiasco, signifying a focus on ensuring the safety of public money to prevent significant investor losses. The NYDFS stablecoin guideline is part of a broader effort to ensure the stability of the marketplace and consumer protection, as stated by NYDFS Superintendent Adrienne Harris.
According to the guidance, the reserves for stablecoins must be segregated from the proprietary assets of the issuing entity. The value of stablecoins must be backed by a reserve comprising specific assets, including U.S. Treasury bills with not over three months to maturity, U.S. Treasury notes, certain types of U.S. Treasury bonds, or reverse repurchase agreements secured by Treasury bills.
Any stablecoin issuer operating in New York must abide by these requirements. This includes current BitLicense holders and limited purpose trust charterholders who issue stablecoins backed by fiat currency.
The NYDFS stablecoin guidance builds on Volt, a transformation program aimed at resolving regulatory delays in the virtual currency businesses regulated by the agency. The program, which stands for Vision, Operations, Leadership, and Technology, contains a number of initiatives to address each of these aspects.
Moreover, the issuers must submit to monthly audits by an independent certified public accountant. The NYDFS has previously published a letter asking crypto firms operating in the state to use blockchain analytic tools and services.
NYDFS Superintendent Adrienne Harris stated that the goal of the guidance is to ensure the safety and soundness of institutions, stability of the marketplace, and consumer protection. The department has been working on this guidance before the recent events of last month.
The issuance of this guidance marks a significant milestone in the regulation of stablecoins in New York. It aims to formalize consumer protection and institutional soundness for the stablecoin market, ensuring a safer and more secure environment for investors.
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