New York’s Department of Financial Services (DFS) has authorised two firms to offer a price-stable cryptocurrency or “stablecoin,” which is pegged to the U.S. dollar, and stressed the need for them to implement effective controls to prevent money laundering, terrorism funding and other illegal activities.
The regulator said it had granted the approvals for Gemini Trust Company and Paxos Trust Company based on a number of conditions, including that the firms ensure that authorised stablecoins are fully exchangeable for a U.S. dollar and that “they implement, monitor and update effective risk-based controls and appropriate BSA/AML and OFAC controls to prevent the Gemini Dollar or Paxos Standard Token from being used in connection with money laundering or terrorist financing.”
The firms would also need to implement effective risk-based controls to prevent usage in illegal activity or market manipulation, and comply with DFS’ transaction monitoring and cybersecurity regulations.
DFS Superintendent Maria T. Vullo said: “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.”