New York State Department of Financial Services Acting Superintendent Kaitlin Asrow announced last week a proposed regulation to build on New York’s first-in-the-nation stablecoin framework in accordance with federal regulations under the GENIUS Act.
Following the department’s June 2022 guidance, this regulation contains additional provisions to ensure alignment with the U.S. Department of Treasury’s proposed requirements for state frameworks to be certified under GENIUS — Guiding and Establishing National Innovation for U.S. Stablecoins.
“The rules and expectations that we have in New York for virtual currency companies have protected New Yorkers and facilitated a stable market,” Asrow in a press release.
“The GENIUS Act’s provisions mirror DFS’s stablecoin framework, and this proposal will ensure that the department’s regulatory regime is in full alignment with new federal requirements while maintaining our standard for protecting consumers and fostering responsible innovation.”
The proposed regulation includes the DFS’s prior requirements for stablecoins backed by the U.S. dollar issued under DFS oversight, including for backing and redeemability, permissible reserves, and independent audits.
It also addresses new federal provisions, including setting maximum amounts of reserves that can be held at any one custodian and requiring entities to adopt risk management programs addressing internal controls, information security, an internal audit system, asset growth, earnings, insider and affiliate transactions, and service provider arrangements.
DFS said it is committed to keeping pace with the virtual currency industry as it evolves and proactively responding to the market through data-driven policy.
This approach includes regular engagement with industry, consumer advocates, the legislature and other regulators; monitoring key trends and issues through research and data collection; and ensuring DFS has the appropriate expertise and operational tools to drive policy and supervision.
The proposed regulation is subject to a preproposal comment period beginning, which began June 9 and ends Monday.
There is also a 60-day comment period upon publication in the State Register.
DFS will review comments to refine the rule as needed and ensure it best serves the needs of New Yorkers.
The final regulation will take effect at the same time as the GENIUS Act, with a one-year transition period for existing New York-licensed issuers.
Until the regulation is applicable, the department’s Stablecoin Regulatory Guidance remains in effect.
To review the proposed regulation or submit feedback, visit dfs.ny.gov/industry_guidance/regulatory_activity/financial_services.