DFS proposed rules to match federal GENIUS Act standards, letting qualified issuers stay under state oversight. The framework caps custodian concentration and adds risk management requirements.
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The New York Department of Financial Services is chasing federal recognition for its stablecoin regulatory program under the GENIUS Act. Newly proposed rules aim to show the state's framework is substantially equivalent to federal standards, letting qualified issuers stay under DFS oversight rather than shifting to a federal regulator.
Acting Superintendent Kaitlin Asrow unveiled the proposal Wednesday. It builds on DFS guidance from June 2022 that governs dollar-pegged stablecoins. The update directly addresses the certification pathway the GENIUS Act created for state programs.
The proposed framework keeps New York's core requirements for reserve composition, token redeemability, and acceptable backing assets. DFS-licensed issuers still face mandatory independent audits. Those elements already define New York's current approach.
New rules add safeguards aimed at federal benchmarks. The updated framework would cap reserve concentration at any single custodian. Issuers would also need structured risk management programs covering critical operations like asset expansion, revenue generation, and third-party relationships.
New York wants official designation that its regulatory structure mirrors federal stablecoin requirements. Achieving that certification would let qualifying issuers continue under DFS jurisdiction. Without it, some operators might move to direct federal oversight.
The GENIUS Act creates a split regulatory model. Issuers with more than $10 billion in circulating tokens fall under federal authority. Smaller operators can stay under state supervision if federal authorities certify those state programs.
A Stablecoin Certification Review Committee evaluates state frameworks. The committee includes officials from the Treasury Department, Federal Reserve, and FDIC. New York must show regulatory parity with federal requirements to pass review.
The revised rules extend beyond reserve backing and redemption mechanics. Issuers would implement controls for corporate governance, cybersecurity, and internal audits. Risk management programs must address related-party transactions and affiliate arrangements.
DFS has overseen stablecoin issuance since 2018. Its current framework covers reserve requirements, redemption guarantees, disclosure obligations, and restrictions on asset rehypothecation. The new proposal updates that structure for compatibility with the GENIUS Act.
The proposal starts with a 10-day preliminary comment period. After State Register publication, DFS will hold a 60-day formal public comment period. Regulators will evaluate stakeholder input before issuing final rules.
DFS said the finalized regulation takes effect alongside the GENIUS Act on January 18, 2027. Current DFS-licensed stablecoin issuers get a one-year transition window. Existing DFS stablecoin guidance continues governing licensed entities until then.
The proposal follows a broader push by DFS to coordinate with other regulators. The department recently signed a supervisory cooperation agreement with the European Banking Authority. New York is working to keep its role as a primary stablecoin regulator as federal rules take shape.
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