Payment Stablecoins Framework

For the purposes of these Standards, which apply to projects promoting their tokens as stablecoins, the SCS defines a stablecoin as follows: 

A fiat-backed token issued on a blockchain and prudentially regulated with a primary regulator, when available, and in any required additional jurisdictions. The stablecoin must maintain reserves at a 1:1 ratio to all outstanding tokens, comprised exclusively of high-quality liquid assets (HQLA) and also adhere to the other requirements specified in these Standards.   

Issuers make the following operational commitments:                                                     

1.1 Maintain fully collateralised treasury reserves of high quality liquid assets with minimal market, credit and concentration risks.

1.2 Reserve assets should be stress-tested and, when possible, overcollateralized to ensure they fully cover the total peg value, even under extreme conditions.

1.3 Avoid unnecessary risk-taking with the reserves backing the stablecoin. Reserve assets must be valued daily on a marked-to-market basis and must cover at least 100% of the par value of all outstanding stablecoins, including those held by the issuer. 

1.4 For reserves that are considered direct bank risk, credit insurance is required when needed.

1.5 Legally separate and title reserves for the benefit of stablecoin holders.

1.6 Ensure reserves are held by credible financial institutions, and where possible, diversified among institutions.

1.7. Restrict re-hypothecation of reserve assets and manage reserves to provide ready liquidity.

1.8 Design products to support timely redemption in fiat without unreasonable redemption costs. 

1.9 Commit to at least monthly disclosures of reserve assets, which must be verified by an accounting firm and annual financial audits of reserves by a registered accounting firm.

1.10 Establish a resiliency and insolvency management program, including design features intended to be bankruptcy remote. 

1.11 Manage adequate policies and controls to manage investment activities and ensure liquidity for redemptions. 

1.12 Liquidity risk management practices and periodic stress testing are required.

Issuers commit to prioritising consumer protection through the following actions:

2.1 Adopt a transparent governance and risk management approach that delivers clear roles and responsibilities and independent board oversight for governance and compliance attributes contained within these Standards.

2.2 Publish reports at least monthly on the total amount of the stablecoins in circulation, the mark-to-market value of reserve assets and the composition of reserve assets. Attestation to the issuer’s reserves must be published on the issuer’s website or similar public forum. 

2.3 Provide clear and conspicuous product and risk disclosures in a white paper or similar public document that covers at a minimum pricing, costs, and fee policies as well as the redemption policy, stabilization mechanism and reserves management. 

2.4 Maintain complaint handling standards to promote prompt resolution of issues and errors including transparency of such on a user website or platform.

2.5 Uphold a standard of business ethics and personal privacy rights of users. Maintain a code of conduct.

2.6 Ensure a professional team qualified with expertise and good character.

Issuers commit to financial crime prevention through the following actions as required and in adherence with fair business practices as applicable:

3.1 Maintain a program with qualified and adequate resources to address issues related to fraud, theft, market manipulation, and inappropriate trading.

3.2 Maintain cybersecurity and information security, data privacy and marketing programs.

3.3 Maintain AML, sanctions, and CTF programs, including customer due diligence and reporting suspicious activities.

3.4 Implement a risk management program and satisfy requirements for regulatory permissions, including timely reporting/filings and a regulatory strategy for compliance with applicable laws, rules and regulations.

3.5 Conduct and document technology, including protocol-level asset, due diligence.