Amid the aftermath of the plunge in Stable Coin TerraUSD (UST) and sister cryptocurrency Luna, regulators in New York, the center of U.S. finance, have stepped up their supervision of stable coin issuers.
According to CNBC on the 8th (local time), the New York State Department of Financial Services (DFS) announced a new regulation that requires cryptocurrency operators that issue stable coins to accumulate reserves and undergo monthly audits.
Stable Coin has grown because it is designed to fix (linked) the value of coins to real assets such as dollars and is stable.
However, UST turned into a piece of tissue last month when the system fixed at $1 per unit was broken, and investors lost a huge amount of about $60 billion.
At that time, there were concerns about “Bank Run” as a sense of crisis spread and the value of Tether, a representative stable coin, was once shaken.
Bank runs refer to a phenomenon in which customers are flocking to withdraw money due to widespread concerns that banks do not have enough money to pay customers.
Until now, doubts have been raised over whether stable coins such as Tether have enough real assets to fix their value.
According to the guidelines released by the New York State Department of Financial Services, stable coin issuers should have full reserves and be able to exchange them to investors.
The guidelines also included that “payment reserves should be distinguished from the assets held by coin issuers.”
In addition, coin issuers must receive monthly audits from independent certified public accountants and submit the results to the authorities.
This regulation targets companies with “bit licenses,” which are licensed for virtual currency business in New York State. These companies issued stable coins as reserves for payment of legal currencies such as dollars.
In the case of UST, it is not subject to the regulation in that it tried to secure the value of coins through algorithms without legal currency reserves, but the UST plunge was the direct background for the regulation.
The authorities expect the measure to improve the opacity surrounding stable coin transactions and payment reserves.
However, there is also criticism that if New York State’s regulations are strengthened, cryptocurrency companies and talents could move to other regions in the U.S., which are more cryptocurrency-friendly.
In response, an official from the New York State Department of Financial Services said, “Half of the venture capital investment in the cryptocurrency industry last year was made by New York-based companies,” adding that clear and strict regulations can attract companies and talent.
