New York's Department of Financial Services has proposed a formal regulatory package to align its first-in-the-nation stablecoin framework with the federal GENIUS Act.

The proposed rule — titled "Authorized Payment Stablecoin Issuers" — retains the core requirements from the department's original June 2022 guidance, including one-to-one U.S. dollar backing, redeemability standards, permissible reserve assets, and independent audits.

Kaitlin Asrow, NYDFS's acting superintendent, announced the proposal on Tuesday.

What's new

The most significant new additions track directly from the federal implementing rules that Treasury, the OCC, and the FDIC have each proposed in the months since the GENIUS Act's passage.

Reserve assets must be diversified across custodians, with maximum concentration limits for any single custodian.

Issuers must also establish risk management programs covering internal controls, information security, internal audit systems, asset growth, earnings, insider and affiliate transactions, and service provider oversight.

Meanwhile, the rule introduces a dual-certification layer for reserve reporting.

Each month, the CEO and CFO of a licensed issuer must certify the accuracy of the required reserve composition report. An annual attestation from a registered public accounting firm is also required, covering the effectiveness of internal controls tied to reserve compliance.

Issuers with outstanding stablecoin value at or above $25 billion face an additional floor.

The proposal would require issuers with at least $25 billion in outstanding stablecoins to hold at least 0.5% of reserves, capped at $500 million, in insured deposits at an insured depository institution.

Redemption and failure rules

On redemption, the rule also sets a two-business-day outer limit for timely redemption following a holder's request. Only the OCC, Federal Reserve, or the NYDFS superintendent may impose discretionary limitations on that timeline.

If an issuer falls below its minimum reserve requirement for 15 consecutive business days, it must begin winding down — liquidating reserves and redeeming outstanding coins at no charge to customers.

Prohibitions

The prohibition list is also expanded.

Rehypothecation of reserve assets is barred outright, except in narrow circumstances subject to superintendent approval. Tying arrangements, misleading marketing, misrepresentation of insured status, and the payment of interest on stablecoins are all prohibited, consistent with the GENIUS Act's text and the OCC's implementing framework.

The proposal is explicitly designed to meet the Treasury's "substantially similar" certification threshold, which is the standard that determines whether a state regulatory regime can retain oversight of stablecoin issuers with less than $10 billion in outstanding issuance value, rather than ceding that oversight to federal regulators.

Timeline

A 10-day pre-proposal comment window opened June 9, followed by a 60-day formal comment period after publication in the State Register.

New York's existing stablecoin licensees — which include some of the largest dollar-pegged issuers in the market — now have until the end of the comment period to weigh in before the rule is finalized.

The Treasury's proposed implementing rule, which The Block reported on in April, laid out those criteria in detail. The final rule takes effect on the same date the GENIUS Act becomes operative, with a one-year compliance runway for issuers already licensed under New York's existing regime. The 2022 guidance stays in force until then.

The OCC's own GENIUS Act implementation proposal from February established the reserve and custody requirements that New York is now importing into its state framework. Also, the FDIC separately proposed its stablecoin ruleset in April, completing the coordinated federal push that prompted Tuesday's NYDFS action.