The NYDFS (New York Department of Financial Services) has issued new guidelines on stablecoins. As per the report, all stablecoins must have an asset reserve backing them. Also, the reserve asset’s value must equal a unit of its stablecoin.
In addition, holders must be able to redeem them for United States Dollars. The regulator announced on Wednesday in reaction to the recent Terra collapse.
Superintendent Adrienne Harris, leader of the DFS (Department of Financial Services), noted that:
With our years of experience in the crypto space, we issue regulations for stablecoins. This will create a clear guideline for crypto companies to issue dollar-backed stablecoins in NY
Harris added that the purpose of these guidelines is to protect the rights of investors. She noted that the agency is ready to enforce the regulations thoroughly.
Terms Of The New York Guideline
As per the regulation, all stablecoins should be backed by an asset reserve. Also, these assets must equal the price of each item every day.
Furthermore, the stablecoin’s issuer must have clear and concise policies. Before publishing the policies, the DFS must approve them. Also, holders of the stablecoin must be allowed to redeem it at a price equal to the US Dollar.
Additionally, the reserved assets will be under the custody of an authorized US custodian organization. The assets must be separate from the daily operation revenue of the issuer as well.
According to the regulatory agency,
This regulatory framework aims at setting requirements applicable to all Dollar-backed stablecoins under the DFS. Also, the DFS can impose special requirements on a stablecoin. However, the details of the different requirement must be stated.
This regulation is suitable for stablecoin issuers such as Circle. Circle claims US Dollar deposits and short-term treasury back its USDC. Hence, users can redeem them for United States Dollars.
Meanwhile, an impartial and Certified Public Accountant will evaluate the claims of the stablecoin issuer. The accountant will do the evaluation every month. This is to make sure the stablecoins are pegged to whatever legal currency they claim.
This is the latest tightening of laws that affect stablecoins. Most countries have been forced to regulate the sector due to recent fraud events. Stablecoins can be pegged to either commodity like gold or fiat currencies.
Stablecoin Regulation Globally
On the 10th of June, Japan passed a bill to protect investors’ funds. According to the legislation, stablecoins must be pegged to the country’s Yen. It can also be tied to any other legal currency.
After the fall of Terra’s USD, the United Kingdom is considering regulations. The regulation is to empower its watchdog to oversee digital money. Also, the regulator will be able to safeguard customers’ payment transactions.