

June 8, 2022
TO: Entities Licensed Under 23 NYCRR Part 200 or Chartered as Limited Purpose Trust Companies Under the New York Banking Law That Issue U.S. Dollar-Backed Stablecoins Under the Supervision of the New York State Department of Financial Services (“DFS”)
FROM: Adrienne A. Harris, Superintendent of Financial Services
RE: Guidance on the Issuance of U.S. Dollar-Backed Stablecoins
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The adoption of stablecoins worldwide has grown substantially in recent years, and more regulators and policymakers are showing an interest in stablecoin arrangements and the rules that apply to them. Recent public policy discussions have addressed prudential authority over stablecoins generally, as well as specific prudential concerns with stablecoins, such as the existence of appropriate reserves backing the stablecoins and the possibility of “runs” on the stablecoins similar to bank runs.[1] As the prudential regulator of companies engaged in virtual currency business activity in New York,[2] DFS has imposed requirements, standards, and controls on the stablecoins issued by its regulated entities since 2018, when DFS approved the first issuance of stablecoins by its regulated virtual currency companies.[3]
When a company applies for a license to engage in virtual currency business activity (a “BitLicense”)[4] or a charter as a limited purpose trust company under the New York Banking Law, DFS reviews the company’s business plan and product offerings in detail, and any stablecoin-related aspects of the company’s business model are thoroughly evaluated as part of DFS’s determination of whether to grant the license or charter. After licensure, BitLicensees must obtain DFS’s written approval before introducing a materially new product, service, or activity,[5] and this prior-approval requirement applies to the issuance of a stablecoin. DFS imposes analogous requirements on New York State limited purpose trust companies that engage in virtual currency business activity and, accordingly, these companies also require DFS’s written approval before they may issue a new stablecoin in New York.
The purpose of this Guidance on the Issuance of U.S. Dollar-Backed Stablecoins (this “Guidance”) is to emphasize certain requirements that will generally apply to stablecoins backed by the U.S. dollar that are issued under DFS oversight. Specifically, this Guidance focuses on DFS requirements relating to:
Entities that issue stablecoins under DFS supervision, or that may be interested in doing so, can use this Guidance to better understand the baseline requirements in these three categories that they are expected to meet concerning U.S. dollar-backed stablecoins.
It is noted that, although stablecoins are a type of virtual currency that can be designed to maintain a stable value relative to any national currency or other reference asset, this Guidance applies only to stablecoins backed by the U.S. dollar, and only to stablecoins that are issued under DFS supervision by DFS-regulated virtual currency entities.
Baseline requirements for the issuance of U.S. dollar-backed stablecoins
DFS will generally impose the following conditions on all U.S. dollar-backed stablecoins whose issuance is subject to DFS approval.
For purposes of item 3(a)(iv), the CPA shall be entitled to rely on the DFS-imposed conditions on the Reserve assets that applied as of each day in the period covered by the attestation as reported to the CPA by the Issuer, together with the Issuer’s certification that such conditions are being accurately reported. In all events, the specific conditions on the Reserve assets against which the attestation was performed shall be included in the CPA’s attestation report.
Please note that the above requirements as to 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. DFS looks at a range of potential risks before authorizing a regulated virtual currency entity to issue a stablecoin, including risks relating to cybersecurity and information technology; network design and maintenance and related technology and operational considerations; Bank Secrecy Act/anti-money-laundering (“BSA/AML”) and sanctions compliance; consumer protection; safety and soundness of the issuing entity; and the stability/integrity of the payment system, as applicable. DFS may impose requirements on a stablecoin arrangement to address any of these risks, or any other risks, consistent with DFS’s statutory mandate and the laws and regulations relevant to the circumstances.[9]
This Guidance is not intended to limit, and does not limit, any power of DFS or the scope or applicability of any law or regulation. DFS may, at any time and in its sole discretion, prohibit or otherwise limit a stablecoin’s issuance or use before or after a DFS-regulated Issuer begins issuing the stablecoin, and may require that any such Issuer delist, halt, or otherwise limit or curtail activity with respect to any stablecoin.
This Guidance is not intended to, and does not, affect obligations of Issuers to submit audited financial statements to DFS pursuant to the New York Banking Law, the virtual currency business activity regulation, 23 NYCRR Part 200, the Issuer’s Supervisory Agreement with DFS, or any other relevant law or regulation. DFS may update this Guidance from time to time, or withdraw it.
Each DFS-regulated issuer of a stablecoin is responsible for understanding and complying with all applicable laws and regulations, including any applicable legal and regulatory requirements imposed by other state or federal regulatory agencies. This Guidance is not intended to address and does not address such other state, federal, or other requirements.
Issuers that currently issue U.S. dollar-backed stablecoins under DFS supervision are expected to come into compliance with this Guidance within three months of the date hereof, except as to the requirements set forth in items 3(b) and 3(d), with which these Issuers shall come into compliance in a reasonable period as determined by DFS in its sole discretion.
[1] See, e.g., President’s Working Group on Financial Markets, et al. Report on Stablecoins (Nov. 2021) at 1-2.
[3] See DFS Continues to Foster Responsible Growth in New York's Fintech Industry With New Virtual Currency Product Approvals (Sept. 10, 2018).
[6] In this Guidance, a “business day” is defined as a business day (9 a.m.-5 p.m.) in the United States, New York time.
[7] A compliant redemption order received between the end of a business day and the start of the following business day shall be treated as having arrived during the following business day. Note that “receipt” of a redemption order shall be deemed to have occurred at the earlier of actual receipt and the time when actual receipt would have occurred but for Issuer negligence or willful ignorance.
[8] Reconciling items may exist, for example, in cases where the assets backing a newly minted stablecoin are in transit to the depository institutions and/or custodians.
[9] See, e.g., New York Financial Services Law §§ 102 and 201; New York Banking Law § 10; 23 NYCRR Part 200; and 23 NYCRR Part 500.