New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris today issued new DFS Regulatory Guidance, setting foundational criteria for USD-backed stablecoins issued by DFS-regulated entities.

• The stablecoin must be fully backed by a Reserve of assets, meaning that the market value of the Reserve is at least equal to the nominal value of all outstanding units of the stablecoin as of the end of each business day.
• The issuer of the stablecoin (the “Issuer”) must adopt clear, conspicuous redemption policies, approved in advance by DFS in writing, that confer on any lawful holder of the stablecoin a right to redeem units of the stablecoin from the Issuer in a timely fashion at par for the U.S. dollar;
• The assets in the Reserve must be segregated from the proprietary assets of the issuing entity and must be held in custody with U.S. state or federally chartered depository institutions and/or asset custodians.
• The Reserve must consist of the following assets: U.S. Treasury Bills acquired by the Issuer three months or less from their respective maturities, Reverse repurchase agreements fully collateralized by U.S. Treasury bills, U.S. Treasury notes, and/or U.S. Treasury bonds on an overnight basis, subject to DFS-approved requirements concerning overcollateralization, and Deposit accounts at U.S. state or federally chartered depository institutions, subject to DFS-approved restrictions;
• The Reserve must be subject to an examination of management’s assertions at least once per month by an independent Certified Public Accountant (“CPA”) licensed in the United States and applying the attestation standards of the American Institute of Certified Public Accountants (“AICPA”).

It should be noted that redeemability, the Reserve, and attestations are not the only requirements DFS places or may place on the issuance of stablecoins, and the risks connected to these factors are not the only risks DFS considers.

Today, the DFS-regulated stablecoins to which this Regulatory Guidance applies are:

1. the USDP and BUSD, issued by Paxos Trust Company, LLC;
2. the GUSD, issued by Gemini Trust Company, LLC; and
3. the ZUSD, issued by GMO-Z.com Trust Company, Inc. This will apply to any additional U.S. dollar-backed stablecoins that DFS-regulated entities seek to issue.

This Regulatory Guidance does not apply to USD-backed stablecoins listed, but not issued, by DFS-regulated entities. DFS does expect regulated entities that list USD-backed stablecoins to consider this guidance when submitting a request for coin issuance or seeking approval for a coin self-certification policy.