New York DFS proposes stablecoin rules to meet GENIUS Act

The New York State Department of Financial Services has proposed a new regulatory framework for stablecoins, aiming to align its state-level oversight with federal standards established by the GENIUS Act. The proposal, unveiled by Acting Superintendent Kaitlin Asrow, seeks to preserve New York's supervisory role over eligible stablecoin issuers while meeting criteria for federal certification.

The draft regulation builds upon existing DFS guidance first issued in June 2022. It retains core requirements for dollar-backed stablecoins issued under New York's oversight, including one-to-one reserve backing, redemption at par on demand, defined categories of permissible reserve assets, and mandatory independent audits confirming reserve adequacy.

To satisfy federal benchmarks, the proposal introduces new safeguards. These include a cap on how much reserve backing can be held with any single custodian, a measure designed to mitigate concentration risk. It also requires licensed issuers to implement formal, comprehensive risk management programs. These programs must cover internal controls, information security, internal audit functions, oversight of asset growth and earnings,...