Dilendorf & Khurdayan assists clients with creation and issuance of collaterized stablecoins – blockchain tokens that are pegged to stable assets, like US dollar or gold. Unlike classic digital currencies, such as Bitcoin or Ethereum, stablecoins are often pegged 1:1 to a physical asset, which is maintained in custody off-chain and can always be claimed and redeemed in lieu of the stablecoin. This is designed to provide for the coin’s stability as opposed to the volatility of digital currencies that are not backed by collateral.
Advised a Thai-based company on issuing stablecoins pegged to the US dollars in compliance with US federal and state laws and regulations
Helping Clients Navigate Through Legal Requirements Related to Stablecoins
Because off-chain collateralized stablecoins are directly linked to the fiat currency or other assets held in reserve, such stablecoins are often referred to as a digital representation of the pegged fiat currency or off-chain asset.
The dual nature of stablecoins creates additional level of structuring and compliance. On the one hand, stablecoins are deployed on blockchain and enjoy the benefits of the global decentralized technology. On the other hand, maintaining stablecoins’ collateral requires custodial, banking, licensing, audit and other arrangements under control of trusted centralized parties.
Guiding Clients Through the Process of Issuing and Maintaining Stablecoins
Our lawyers will guide you through the full lifecycle of your stablecoin. Our services include:
- Advising on designing, issuing and trading stablecoins in compliance with US federal and state laws and regulations;
- Advising on licensing requirements and obtaining the necessary licenses, such as Money Services Business, New York BitLicense and other state licenses, Limited Purpose Trust Company (licensing requirements will depend on a client’s business model/arrangements with licensed third parties);
- Representing clients in establishing relations with major licensed and regulated trustees/custodians, banks and auditors;
- Advising on KYC/AML policies and procedures;
- Drafting, reviewing and negotiating trust, custodial, technology services and other agreements with third-party providers;
- Advising on and assisting with stablecoin listings on digital currency exchange platforms.
- Department of Financial Services. Information and Resources for Virtual Currency Business Activity (BitLicense) available at https://www.dfs.ny.gov/banking/virtualcurrency.htm
- Department of Financial Services. DFS Continues to Foster Responsible Growth in New York’s Fintech Industry with New Virtual Currency Product Approval available at https://www.dfs.ny.gov/about/press/pr1809101.htm
- Official Portal for North Dakota State Government. Securities Commissioner Issues Order Against Union Bank Payment Coin available at http://www.nd.gov/securities/news/news-archive/securities-commissioner-issues-order-against-union-bank-payment-coin
- Harward Law School Forum on Corporate Governance and Financial Regulation. Stablecoins available at: https://corpgov.law.harvard.edu/2019/02/10/stablecoins/
- Harward Case Study. The State of Stablecoins – Why They Matter and Five Use Cases available at http://www.academia.edu/Documents/in/Harvard_Case_Study
- Harvard Blockchain Lab. Social Media Platforms and Cryptocurrency – Ingenious or Unrealistic available at https://blogs.harvard.edu/blockchain/social-media-platforms-and-cryptocurrency-ingenious-or-unrealistic/