The New York State Department of Financial Services (DFS) has announced today that it authorized Gemini Trust and Paxos Trust to each offer its own stablecoin pegged to the US dollar. Both the Gemini Dollar (GUSD) and the Paxos Standard (PAX) are said to be ERC20 tokens backed one to one by fiat US dollars held at US-located and FDIC-insured banks.
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.”
Tokens Subject to Forfeiture and Seizure
As part of the approval process, the regulator ensured that each company complies with requirements regarding anti-money laundering, anti-terror financing, anti-fraud, and consumer protection measures. The companies also must post terms and conditions on both Gemini’s and Paxos’s websites warning consumers that: Any stablecoin and the fiat currency available upon redemption may be forfeited if it has been 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; and any stablecoin or fiat currency available upon exchange that has been subject to freezing, forfeiture or seizure may be wholly and permanently unusable and may be destroyed.
“This is a very exciting time and we thank the DFS and Superintendent Vullo,” said Charles Cascarilla, CEO and co-founder of Paxos. “With Paxos Standard, we hope to enable a truly frictionless, global economy by offering a token that is stable, fast, redeemable, audited, and most importantly, approved and regulated. This is a digital asset that can be trusted.”
Is there a place for regulator-approved stablecoins in the crypto ecosystem? Share your thoughts in the comments section below.