New York DFS Proposes Stablecoin Rules Aligned with GENIUS Act

New York's financial regulator proposed a rule to align the state's stablecoin regime with the federal GENIUS Act, a move that clarifies which issuers stay under state oversight and which face federal supervision.

The New York State Department of Financial Services published the draft regulation this week. The proposal keeps existing requirements for reserve backing, redemption rights, and independent audits. It adds new constraints: a cap on reserves held with any single custodian, and a broader risk-management mandate covering internal controls and information security. The mandate also includes asset growth and affiliate dealings.

The GENIUS Act creates a dual-track system. Issuers with more than $10 billion in outstanding stablecoins fall under direct federal supervision. Smaller issuers can remain under state oversight if their state's rules are certified as substantially similar to federal standards. DFS is positioning New York for that certification.

"The rules and expectations that we have in New York for virtual currency companies have protected New Yorkers and facilitated a stable market," said Acting Superintendent Kaitlin Asrow.

"The GENIUS Act's provisions mirror DFS's stablecoin framework, and this proposal will ensure that the Department's regulatory regime is in full alignment with new federal requirements while maintaining our standard for protecting consumers and fostering responsible innovation."

New York's stablecoin framework dates to guidance issued in June 2022. Federal lawmakers modeled several parts of the GENIUS Act on that guidance. The federal law requires 1:1 backing with high-quality liquid assets, prohibits offering yield to holders, and grants stablecoin users priority repayment rights in bankruptcy.