New York regulator proposes tougher stablecoin requirements under NYDFS rules

The New York Department of Financial Services (NYDFS) wants to tighten the rulebook for stablecoin issuers, building on the state law that has governed fiat-backed token issuance and circulation since last year. For PSPs and issuers, the point is simple: reserve quality, redemption timing, and auditability are moving further up the checklist.

1. Acting NYDFS Superintendent Kaitlin Asrow said the department wants to turn the recommendations it issued in June 2022 into harder requirements. Those recommendations called for stablecoins to be backed by U.S. dollars on a 1:1 basis, redeemable at par on first demand from the customer, and subject to an independent audit.
2. NYDFS also wants issuers to put formal risk management programs in place. The proposed scope includes internal monitoring, information security, internal audit, tracking of asset and revenue growth, surveillance of insider transactions and transactions with affiliated parties, and a documented process for working with service providers.
3. The regulator is proposing a dual attestation model for reserves. Each month, the licensed issuer’s chief executive and chief financial officer would have to confirm the accuracy of the reserve composition report, and a registered audit firm would need to provide an annual confirmation that the stablecoin issuer is meeting the reserve requirements.
4. NYDFS also wants to cap the amount of reserve assets held with a single custodian, to reduce concentration risk if that provider fails or has a technical outage. For companies that issue more than $25 billion in stablecoins, the proposal would require at least 0.5% of reserves, up to $500 million, to be held on deposit at an insured depository institution.
5. The proposed maximum redemption period is two business days from the holder’s request. Any tighter limits could only be set by the US Office of the Comptroller of the Currency (OCC), the Federal Reserve, or NYDFS. If an issuer’s reserves fall below the required minimum and stay there for 15 consecutive business days, the issuer would have to begin liquidation and redeem all outstanding stablecoins without charging customers a fee.

One detail worth noting for payments teams: in May, NYDFS granted a BitLicense to Mastercard, allowing the company to conduct digital asset operations and stablecoin payments in the state. That puts a major card-network name inside the same regulatory perimeter the department now wants to harden further.