The New York State Department of Financial Services (DFS) has proposed updated stablecoin rules designed to bring its state-level framework in line with the forthcoming federal GENIUS Act, which will take effect in January 2027 and create a dual-track oversight system for payment stablecoins across the United States.
New requirements for custody and risk management
Under the draft regulation, licensed issuers in New York must continue to meet existing standards for 1:1 reserve backing, redemption rights, permissible reserve assets, and independent audits. The proposal adds two new areas: a cap on the amount of reserves held with any single custodian, and a mandatory risk management program covering internal controls, information security, internal audits, asset growth, earnings, insider transactions, affiliate dealings, and service provider relationships. Acting DFS Superintendent Kaitlin Asrow said: “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.”
Certification path under the dual-track system
The GENIUS Act requires issuers with more than $10 billion in outstanding stablecoins to fall under direct federal supervision. Smaller issuers may remain under state oversight if their state’s rules are certified as “substantially similar” to federal standards by a Stablecoin Certification Review Committee comprising representatives from the U.S. Treasury, the Federal Reserve, and the FDIC. DFS’s proposal is explicitly intended to meet that certification threshold, allowing eligible New York-licensed issuers to avoid shifting to a federal regulator.
Federal lawmakers modeled several parts of the GENIUS Act on New York’s existing stablecoin framework, first formalized through guidance issued in June 2022. Key provisions include a ban on yield payments to holders and priority repayment rights for users if an issuer files for bankruptcy. DFS has supervised stablecoin issuance since 2018 and currently applies standards covering reserve requirements, redemption rights, transparency, and restrictions on rehypothecation.
International cooperation and implementation timeline
Earlier this month, DFS signed a memorandum of understanding with the European Banking Authority to facilitate cross-border information sharing and supervisory cooperation on stablecoin activity. The state regulator said the proposed rules will enter a 10-day preproposal comment period immediately, followed by a 60-day public comment period once published in the State Register. The final regulation will become effective on January 18, 2027, the same day the GENIUS Act takes effect. Existing DFS-licensed issuers will receive a one-year transition period to comply; the current stablecoin guidance remains in force until the new regulation applies.