The New York Department of Financial Services (DFS) announced it’s authorized Gemini Trust and Paxos Trust to each offer a price-stable cryptocurrency – commonly known as stablecoin – pegged to the US dollar. Department of Financial Services Superintendent Maria Vullo said in a statement: “As the financial technology marketplace continues to evolve, New York is committed to fostering innovation while ensuring responsible growth. These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework that safeguards regulated entities and protects consumers.”
DFS issued a limited purpose trust company charter to Gemini in October 2015 to operate a virtual currency exchange through which it offers customers services for buying, selling, sending, receiving, and storing virtual currency. DFS issued a limited purpose trust company charter in May 2015 to itBit, now Paxos Trust Company, which operates the itBit exchange, to offer services for buying, selling, sending, receiving, and storing virtual currency.
The approvals are based on stringent requirements for these products, and already required of both Gemini and Paxos, including requirements such as:
- Ensure that authorized stablecoins are fully exchangeable for a US dollar, with conditions to ensure monitoring and recordkeeping.
- Implement, monitor and update effective risk-based and other controls to prevent the Gemini Dollar or Paxos Standard Token from being used in connection with money laundering or terrorist financing.
- Implement, monitor and update effective risk-based controls to prevent and respond to any potential or actual wrongful use of stablecoin, including but not limited to its use in illegal activity, market manipulation, or other similar misconduct.
- Compliance with DFS’s transaction monitoring and cybersecurity regulations.
- Post terms and conditions in a prominent location on both Gemini’s and Paxos’s respective websites, and in any other form or manner required by DFS, that warns consumers that:
- Any stablecoin and/or the fiat currency available upon redemption of any stablecoin may be forfeited if the stablecoin has been, or is being used for, illegal activity
- Any stablecoin may be subject to forfeiture to, or seizure by, a law enforcement agency in the event that there is a legal order or other legal process
- Any stablecoin or fiat currency available upon exchange of stablecoin that has been subject to freezing, forfeiture to or seizure by a law enforcement agency, and/or subject to any similar limitation on its use, may be wholly and permanently unrecoverable and unusable and may, in appropriate circumstances, be destroyed
- Maintain policies and procedures for consumer protection and to promptly address and resolve customer complaints.