New York DFS Moves to Align Stablecoin Rules With GENIUS Act

TLDR

• New York DFS proposed a rule to align its stablecoin regime with the GENIUS Act framework.

• The draft keeps 1:1 reserve backing, redemption rights, and audit standards for licensed issuers.

  

• Issuers must limit reserve exposure to a single custodian and strengthen internal risk controls.

• The GENIUS Act sets federal oversight for issuers with over $10 billion in circulation.

• Smaller issuers may remain under state supervision if regulators certify state rules.

New York regulators moved to align state stablecoin oversight with incoming federal law. The Department of Financial Services proposed a rule that incorporates federal standards while preserving its framework. The agency said the changes will keep state supervision consistent with the GENIUS Act.

Proposal Aligns State Rules with GENIUS Act Standards

The Department of Financial Services released a draft rule for public review. The proposal keeps existing reserve, redemption, and audit requirements for licensed issuers. It also adds new controls that reflect federal expectations under the GENIUS Act.

Under the draft, issuers must maintain 1:1 backing with high-quality liquid assets. They must also limit reserve exposure to a single custodian. The rule mandates risk management programs covering internal controls and information security. It requires oversight of insider transactions and affiliate dealings. It also sets standards for asset growth and earnings monitoring.

Acting Superintendent Kaitlin Asrow said the framework has protected residents and supported market stability. She stated, “The GENIUS Act’s provisions mirror DFS’s stablecoin framework.” She added that the proposal ensures full alignment with federal requirements while maintaining consumer protections.

The GENIUS Act created a dual system for the supervision of stablecoins. Issuers with more than $10 billion in circulation will fall under direct federal oversight. Smaller issuers may remain under state supervision if regulators certify their rules.

Federal lawmakers modeled several provisions on New York’s 2022 stablecoin guidance. The federal law prohibits issuers from offering yield to holders. It also grants stablecoin users priority repayment rights in bankruptcy.

Certification Path and Implementation Timeline

New York seeks certification under the federal framework established by the GENIUS Act. Certification would allow eligible issuers to continue operating under state supervision. A Stablecoin Certification Review Committee will handle the approval process.

The committee will include representatives from the U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation. Federal agencies must issue implementing rules by July 2026. State regulators are updating their regimes before that deadline.

DFS said it has supervised stablecoin issuance since 2018. The agency applies standards covering reserve backing and redemption rights. It also enforces transparency requirements and restricts rehypothecation of reserve assets.

Earlier this month, DFS signed a memorandum of understanding with the European Banking Authority. The agreement supports information sharing and supervisory cooperation. It focuses on stablecoin activity across jurisdictions.

The department immediately opened a 10-day preproposal comment period. After publication in the State Register, regulators will allow 60 days for public comments. Officials will review feedback before adopting a final rule.

DFS said the regulation will take effect on Jan. 18, 2027. Existing licensees will receive a one-year transition period to comply. Current stablecoin guidance will remain in force until the new regulation becomes applicable.

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