Stakeholder Letter - Consultation Paper - Digital Asset Business Single Currency Pegged Stablecoins (SCPS) Guidance (2024-12-03)

Summary

This is a stakeholder letter from the Bermuda Monetary Authority summarising the feedback received on its May 2024 draft Guidance for Digital Asset Business Single Currency Pegged Stablecoins (SCPS) and describing how the Authority has responded. It does not itself impose new rules; it explains what changes have or have not been made to the draft Guidance ahead of publication of a final version.

• Scope: BMA points stakeholders to an expanded FAQ section to clarify which Digital Asset Businesses qualify as Single Currency Pegged Stablecoin Issuers (SCPSIs) and fall within scope.
• Backing assets: Guidance refined on acceptable backing assets and risk based over collateralisation expectations, while maintaining a risk based approach rather than adopting Basel III mechanically.
• Attestations: Guidance updated to clarify expected frequency and content of backing asset attestations, despite noted difficulty and cost for smaller firms in obtaining third party attestations.
• Disclosures: Custody arrangement disclosure requirements revised to address confidentiality concerns; whitepaper and redemption related disclosure expectations remain as proposed.
• Stress testing: Guidance amended to add further considerations on frequency and required outcomes of stress testing exercises.
• Bankruptcy remoteness: No amendments made; Authority acknowledges Orphan SPVs and Segregated Account Companies as acceptable bankruptcy remote structures where appropriate.
• Interoperability: Guidance amended to address technical risks of cross chain bridges and synchronisation of proof of reserve systems across blockchains.
• Recovery and resolution planning: No amendments made, as feedback aligned with the draft Guidance.
• Liquidity requirements: No amendments made; Authority declined to expand acceptable core liquid assets to include money market funds.

The letter states that a final, revised Guidance will be published following this consultation. No specific publication date or transition deadline is given, and stakeholders with questions are directed to contact the Authority's fintech team.

Applies to

Digital Asset Businesses (DABs), Single Currency Pegged Stablecoin Issuers (SCPSIs)