The NY Department of Financial Services (DFS), which oversees regulated crypto companies in the state, on June 8, released formal guidelines for U.S. dollar-backed stablecoin issuers.
The DFS has laid down requirements, standards, and controls for stablecoins issued in NY since 2018. This includes requirements for redeemability of stablecoins, the reserves backing the stablecoins, and the attestation of such reserves. These guidelines currently apply to Paxos Trust Company’s USDP and Binance USD (BUSD), Gemini-issued GUSD, and ZUSD issued by GMO-Z.com.
It is important to note that the new guidelines apply only to U.S. dollar-pegged stablecoins issued by regulated entities in N.Y. that fall under the oversight of the DFS.
Under the new guidelines, stablecoins must be 100% backed by reserves at the end of every business day. However, the approved list of assets that can be used as reserves is limited to U.S. Treasury Bills, repo agreements fully collateralized by treasury bills, notes or bonds, government money market funds, and cash deposits. The DFS also has the authority to place limits on the amount of reserves that can be held in certain approved assets.
The guidelines also state that the reserves must be separated from the proprietary assets of the stablecoin issuers. And the reserves must be held by the issuers in a U.S. state or federally chartered depository institution with deposits insured by the Federal Deposit Insurance Corporation (FDIC) or with asset custodians approved by the DFS.
Stablecoin issuers are also required to get monthly and yearly attestations of their reserves from approved chartered accountants, as per the new guidelines. Gemini, Paxos, and other stablecoin issuers will also need to furnish these attestation reports to the DFS and the public.
The most important requirements set down by the guidelines involve the redeemability of stablecoins.
Stablecoin issuers need to adopt “clear, conspicuous redemption policies” that enable investors to redeem their holdings at any time. This means stablecoin issuers need to ensure that all redemption requests are processed within two business days after receiving the request. However, the DFS may extend the redemption period under certain circumstances.
Paxos noted in a tweet that it already complies with these guidelines and that other issuers should follow suit.
New @NYDFS stablecoin guidelines make it clear all
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