NYDFS Proposes Rules for Payment Stablecoin Issuers

The New York State Department of Financial Services ("NYDFS") proposed regulations governing payment stablecoin issuers. The proposed regulations are intended to align with the federal GENIUS Act.

Under the proposal, the NYDFS sets reserve, redemption, capital, and anti-money-laundering requirements for firms it licenses to issue stablecoins. Limited purpose trust companies and other eligible entities could apply to the superintendent for approval to issue payment stablecoins. Public companies not predominantly engaged in financial activities would generally be barred.  Applicants would have to show financial capacity and that no officer or director has a disqualifying felony conviction.

The NYDFS proposed rules require issuers to back their stablecoins one-for-one with GENIUS Act-authorized reserve assets held by a third-party custodian, and to publish monthly reserve-composition reports certified by the chief executive and chief financial officers and attested by an accounting firm. Issuers with $25 billion or more in outstanding stablecoins would have to keep at least 0.5 percent of reserves (up to $500 million) in insured deposits. Issuers would have to honor redemptions within two business days and could not pay interest, rehypothecate reserves, or misrepresent that stablecoins are insured.

The proposed rule would also impose tiered capital and operational-backstop requirements, Bank Secrecy Act and sanctions compliance with an annual certification, annual examinations, and cybersecurity obligations. An issuer that fell below its reserve minimum for 15 consecutive business days would have to begin liquidating and redeeming its stablecoins at no charge.

The proposed rule, new Part 202 of the department's regulations, would take effect when the GENIUS Act does and would withdraw the department's 2022 stablecoin guidance. Comments are due 60-day comment period upon publication in the State Register.