New York regulator proposes stablecoin rule aligned with GENIUS Act

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NY stablecoin rule proposal

Highlights

The New York Department of Financial Services proposed the 'Authorized Payment Stablecoin Issuers' rule to align with the federal GENIUS Act, mandating one-to-one dollar backing, risk controls, and independent audits.
Stablecoin issuers with $25 billion or more outstanding must hold at least 0.5% of reserves, capped at $500 million, in insured deposits under the new liquidity requirement.
New redemption standards include a two-business-day maximum for holder requests and a mandatory wind-down process if reserve requirements are breached for 15 consecutive business days.

Rule changes and compliance timeline

As reported by The Block, the New York Department of Financial Services has proposed a formal rule package called "Authorized Payment Stablecoin Issuers" to bring its state regime into line with the federal GENIUS Act framework.

The proposal preserves the main features of New York's June 2022 guidance, including one-to-one U.S. dollar backing, redemption standards, eligible reserve assets and independent audits. Kaitlin Asrow, the agency's acting superintendent, announces the proposal on Tuesday.

The new elements mirror rules proposed by the Treasury, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation since the GENIUS Act passed. Reserve assets must be spread across custodians under concentration limits, and issuers must maintain risk management programs covering internal controls, information security, internal audit systems, asset growth, earnings, insider and affiliate transactions, and oversight of service providers.

Monthly reserve composition reports must now be certified by both the chief executive officer and chief financial officer of a licensed issuer. A registered public accounting firm must also provide an annual attestation on the effectiveness of internal controls linked to reserve compliance.

A 10-day pre-proposal comment window opens June 9, followed by a 60-day formal comment period after publication in the State Register. The final rule takes effect on the same date the GENIUS Act becomes operative, while issuers already licensed in New York receive a one-year compliance period and the 2022 guidance remains in force until then.

Market impact and oversight thresholds

The proposal adds a stricter liquidity requirement for the largest issuers. Companies with at least $25 billion in outstanding stablecoins would have to keep at least 0.5% of reserves, capped at $500 million, in insured deposits at an insured depository institution.

On redemptions, the rule sets a maximum period of two business days after a holder request. Only the OCC, the Federal Reserve or the NYDFS superintendent may impose discretionary limits on that timeline.

If an issuer stays below its minimum reserve requirement for 15 consecutive business days, it must begin winding down by liquidating reserves and redeeming outstanding coins without charging customers. The proposal also expands prohibitions by banning rehypothecation of reserve assets except in narrow cases approved by the superintendent, while also barring tying arrangements, misleading marketing, false claims about insured status and the payment of interest on stablecoins.

The framework is designed to satisfy the Treasury's "substantially similar" test, which determines whether a state can keep oversight of stablecoin issuers with less than $10 billion in outstanding issuance value instead of handing supervision to federal regulators. That positions New York to preserve a central role in regulating some of the largest dollar-pegged stablecoin issuers as federal and state rules converge.

Our earlier coverage of the House Ways and Means Committee’s digital asset tax proposal outlined lawmakers’ efforts to modernize U.S. tax rules for cryptocurrencies and related products. We noted that the initiative aims to reduce uncertainty and simplify compliance for individuals and businesses, while supporting U.S. competitiveness as digital-asset markets expand.

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