In order to ensure maximum protection of consumers and financial institutions, the New York financial watchdog on Wednesday has released strict and attestation requirements for licensed stablecoin issuers.
The newly released guidance will affect the existing holders of the BitLicense, that is, companies allowed to conduct Virtual Currency Business Activity in New York, or limited purpose trust charter holders that issue fiat-backed stablecoins.
According to the agency, stablecoins are expected to be fully backed by a reserve of assets and redeemable by investors. The financial watchdog also laid out requirements for those reserves, including the different assets the reserves should contain, and a specification that they are “segregated from the proprietary assets of the issuing entity.” Stablecoins issuers are also required to respond to monthly audits by an independent certified public accountant.
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In an interview with the NYDFS Superintendent, Adrienne Harris, she told the media saying:
“As we think about stablecoins and this guidance, and this is something we have been working on before the events of last month, really our goal is to accomplish those things for the stablecoin market, the safety and soundness of institutions, stability of the marketplace and consumer protection.”
In recent times, regulators across various countries have focused on stablecoins regulation due to the transparency issues surrounding trading these digital assets and reserves backing them, as well as market participants’ reliance on them to enable trading in other crypto protocols.
The rapid rise of TerraUSD and the attention its generated, followed by its rapid crash, an event that led to the loss of $60 billion investors’ funds is also a big factor that spurred regulators’ attention to stablecoins.
Although, TerraUSD is different from the stablecoins addressed in the newly released New York regulator’s guidance on Wednesday, TerraUSD is a decentralization algorithmic stablecoin compared to one run by a single entity and backed by fiat currency, but the collapse has raised the profile of these crypto assets and has resulted in investors doubting the industry’s reputation.
TerraUSD is different from the stablecoins addressed in the New York regulators’ guidance on Wednesday – it’s a decentralized algorithmic stablecoin rather than one run by a single entity and backed by fiat currency – but the saga has raised the profile of these crypto assets and has bruised the industry’s reputation.
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