Tokenisation of real world assets (RWAs) Guidance Note

Summary

This guidance note sets out the JFSC's regulatory approach to the tokenisation of real world assets (RWAs) such as securities, bonds, commodities, currencies and fund units. It clarifies the application and consent process issuers must follow, applying a substance over form approach, and is separate from guidance on virtual asset ICOs/token offerings (though it applies where an existing virtual asset is tokenised).

• Corporate structure: Issuer must be incorporated as a Jersey company or Jersey LLC, administered by a JFSC-licensed trust and company service provider (TCSP), and appoint a Jersey-resident director who is a principal person of that TCB.
• Regulatory consent: Issuer must obtain COBO consent from the JFSC before undertaking any token issuance, and prior JFSC approval before changing the TCB, Jersey-resident director or specified counterparties.
• AML/CFT/CPF: Issuer must apply AML/CFT/CPF requirements to token purchasers/sellers, apply enhanced measures for higher-risk cases, and maintain related policies, procedures and controls (due diligence, transaction monitoring, screening, suspicious activity reporting, record keeping).
• Verification and disclosure: Smart contracts deployed each year must be audited with results made public; underlying assets must be independently verified annually by a qualified third party confirming 100% collateralisation and ring-fencing, with results published; performance of the token against NAV and other disclosures must be made publicly available.
• Custody and asset protection: Underlying RWAs must be held by a professional custodian in an equivalent jurisdiction, and assets must be ring-fenced and not lent out for yield unless expressly agreed by the JFSC.
• Information memorandum: Issuer must prepare and submit an information memorandum (which may be a white paper) meeting prospectus-style content requirements, and ensure all marketing material is clear, fair and not misleading.
• Stablecoins: Stablecoin issuers must additionally disclose collateral assets and liquidity, custody arrangements, who can buy/redeem tokens (e.g. authorised participants), and any de minimis issuance/redemption thresholds.
• Reporting: The issuer's governing body must promptly notify the JFSC if it defaults on any tokens issued or is unable to redeem tokens within a reasonable period.

The guidance applies on a case-by-case basis and issuers must also consider other applicable Jersey laws (e.g. the funds regime for tokenised fund units). The JFSC states it will review and update this guidance periodically.

Key obligations

• Incorporate the issuing entity as a Jersey company or Jersey LLC
• Appoint and maintain administration by a JFSC-licensed TCSP and a Jersey-resident director who is a principal person of that TCB
• Obtain COBO consent from the JFSC before undertaking any token issuance
• Obtain prior JFSC approval before changing the TCB, Jersey-resident director, or specified counterparties
• Apply AML/CFT/CPF requirements and enhanced due diligence measures to token purchasers and redeemers
• Develop, implement and monitor policies, procedures and controls covering conduct, CDD, transaction monitoring, screening, suspicious activity reporting and record keeping
• Arrange for all smart contracts deployed in the year to be audited and publish the results
• Independently verify underlying assets annually via a qualified third party and publish the results confirming 100 percent collateralisation and ring-fencing
• Publish verification of underlying assets within three months of the issuer's financial year end
• Hold underlying RWAs with a professional custodian accountable in an equivalent jurisdiction
• Ring-fence assets and not lend them out for yield unless expressly agreed by the JFSC
• Publicly disclose token performance against NAV, including premium/discount disclosures where thresholds are breached
• Prepare and submit an information memorandum (or white paper) meeting prospectus-style content requirements
• Ensure marketing material is clear, fair and not misleading, and disclose any differences between token rights and underlying asset rights
• Provide details of how underlying assets will be distributed or realised if the issuer or custodian ceases business
• Promptly notify the JFSC of any default on tokens issued or inability to redeem tokens within a reasonable period
• For stablecoin issuers, disclose collateral assets, liquidity, custody arrangements, sales/redemption counterparties and any de minimis thresholds

Applies to

issuers of tokenised real world assets, trust and company service providers (TCSPs), stablecoin issuers, Jersey companies and Jersey LLCs issuing tokens

Deadlines

• within three months of the end of the issuer's financial year end: Independent verification of underlying assets must be published
• annually: Underlying assets must be independently verified confirming 100 percent collateralisation and ring-fencing