The New York State Department of Financial Services (DFS) reportedly introduced instructions dedicated to U.S. dollar-backed stablecoins issued by institutions under the regulation of the DFS. 

Specifically, per an announcement from the DFS, it reportedly takes the pioneering role as a regulator in America to apply that kind of expectation to a stablecoin issuer.

The mandates included in the instruction reportedly consist of redeemability, reserves, and attestation. The details suggested that a stablecoin is required to be backed entirely by reserves as of the end of every business day, and the issuer must have a redemption policy greenlit prior to writing by the DFS, which grants the holder the legal power to redeem the stablecoin for U.S. dollars.

Additionally, the issuer’s reserves need to be segregated from its proprietary assets and made up of U.S. Treasury instruments or deposits at the state or federally chartered institutions. 

The reserve is reportedly required to undergo an examination on a month-to-month basis carried out by a certified public accountant.

The guidance will be applicable exclusively to issuers subject to the regulation of the DFS and limited purpose trust charter holders functioning in the state. 

Currently , these entities reportedly include the Paxos Trust Company, issuer of the Pax Dollar (USDP) and Binance USD (BUSD); Gemini Trust Company, the issuer of the Gemini Dollar (GUSD); and GMO-Z.com Trust Company, the issuer of the Zytara Dollar (ZUSD). 

The guidance is reportedly not applicable to other stablecoins with potential listings to be carried out by DFS-regulated establishments.

The New York state BitLicense, as the DFS license is perceived, is known for its notoriously difficult stance for companies to secure, and has received criticisms from New York City Mayor Eric Adams. Numerous crypto companies relocated their shop out of the state when it was introduced in 2015. The DFS is planning for to three-fold increase in the size of its virtual currency team in 2022, as part of its program to “address delays in regulatory processes and ensure operational excellence across the Virtual Currency unit.”