Yesterday, the New York State Department of Financial Services (NYDFS) issued regulatory guidance for stablecoins issued by DFS-regulated entities. It wants to see clarity on the redeemability of the digital currency and imposes requirements on the backing assets and collateral audits.
Perhaps the biggest requirement is the restriction on the collateral that backs the stablecoin. Commercial paper is out, perhaps triggered by concern over the Tether stablecoin, which claims to have significant commercial paper holdings. Instead, it restricts the assets to short term Treasury Bills, overnight repurchase agreements (repos) backed by Treasuries, Treasury money market funds, and U.S. chartered bank accounts.
While most stablecoins are redeemable, some issuers aren’t keen to deal with the public, so they will only redeem via intermediaries or market makers. The NYDFS says holders should be able to redeem stablecoins “from the Issuer in a timely fashion at par.”
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