Global Digital Finance
Code of Conduct
PART VII - PRINCIPLES FOR STABLECOIN ISSUERS
This document must be read in conjunction with the Code of Conduct Overarching Principles and the Key
Considerations for Stablecoin and Stablecoin Issuers document.

Readers are reminded that the term “Stablecoin” references a variety of coin structures, more details of which
are set out in the Key Considerations for Stablecoin and Stablecoin Issuers document. Stablecoin is not always
stable and may be stabilised in one or more ways, which may or may not be effective. All market participants
are reminded of the necessity to focus on the substance of any crypto-asset, rather than labels, in order toproperly understand its function.

Deleted: only
Deleted: stabilized on
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Stablecoin issuers can be ‘Centralised’ or ‘Decentralised’. Centralised stablecoins are those crypto assets issued
and operated by a legal entity. Decentralised stablecoins are non-custodial with no or partial third-party control.
We recognise that these principles are intended to reflect best practice across all structures but we recognisethat they suit Centralised issuers better.
It is recognised that, dependent on the underlying structure of a stablecoin, principles outlined in other GDF
codes of conduct will also apply, for example, i) security tokens ii) custody, iii) token issuance etc - see
www.gdf.io for current GDF codes. To avoid duplication these principles will not be covered in this document.

1. COMPLIANCE WITH EXISTING LAWS

Deleted: here

Deleted: ¶a. We understand that even if a token falls outside the remit of financial laws, we remainsubject to all other existing laws, including as noted in the Overarching Principles consumer
protection laws. Therefore, we will seek to abide by the Additional Principles set forth below.

Deleted: thatb. Where we are aware that our activities are governed by existing rules and regulations, wewill take all reasonable measures to comply with applicable laws, rules or regulations.
i.

A stablecoin pegged to a fiat currency may be required to adhere to laws governingsafekeeping and settlement of fiat currency.

ii.

However, if pegged to a digital asset or some other underlying asset, the regulatory
requirements may be different.
Deleted: ,c.

We will ensure we comply with all local legal and regulatory requirements concerning
consumer protection laws, such as conflict resolution and safekeeping of customer assets.

Deleted:Deleted: potential
Deleted: ¶¶¶¶¶d. We will comply with any and all applicable regulatory requirements, including thoseconcerning deposit-taking, e-money, and financial instruments.

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2. PRICING AND VALUATION
a. We will ensure appropriate pricing and valuation policies are in place depending on the
structure of the stablecoin as follows:i.

Principles for fair direct pricing based on liquid assets (e.g. 1:1 fiat backed coins); orii.

Principles for fair indirect pricing for stablecoins using a fiat reference point but which
are collateralised using a more structured approach; oriii.

Principles for accurate valuation and fair pricing for stablecoins using a collateralreference point for valuation; orb. Principles for fair pricing of Algorithmic stablecoins which must consider the following:i.

Clear and concise explanations of the different factors that influence the pricing
mechanism, including controls and incentives that mitigate price manipulation.

ii.

Appropriate level of support for the pricing mechanism sufficient to maintain user
confidence.

iii.

Steps that will be taken to identify and address undermined confidence compromising
the algorithm’s ability to maintain the price stability.

Deleted: algorithms
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3. ISSUANCE AND REDEMPTION
We will have appropriate arrangements in place to govern:a. Key Operational Functions for Ongoing Issuance - Identification and maintenance of key
operational functions underlying the stablecoin structure that will keep the stablecoin inexistence and operational for ongoing issuance, including the following (whether internallyarranged or externally sourced):i.

methodology for obtaining appropriate pricing and valuation information from external
pricing sources or oracle(s) (including replacement of sources where necessary);ii.

technical support and engineering for the stablecoin model and relevant smart
contracts;iii.

treasury function, including cash management, collateral management and accounting
and liquidation (see also further below regarding redemption);
1. To the extent that change of type of collateral is allowed by the governing
documents of the stablecoin, we will put robust procedures in place aroundthe decision to change the type of collateral backing the stablecoin, including
established policies on how participant-proposed changes will be handled.

iv.

compliance arrangements to maintain an appropriate overview of stablecoin issuancestructure, including observance over minting and burning practices, pricing, valuation,
collateral maintenance, technology development, security, and all other key
operational functions for confidence in ongoing future issuance;v.

specific audit function to provide dynamic, near real-time monitoring and attestmentof the outstanding token supply, and in cases where the outstanding token supply is

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not trivially determined or otherwise self-evident, we would ideally involve a third party
to audit methodology and/or results in this regard; andvi.

in the event that a rating is sought or has been obtained for the Stablecoin, Issuers
should refer to GDF Code of Conduct Part V - Principles for Token Comparison and
Rating Websites.

b. Special considerations for algorithmic structures - Specifically in the case of algorithmic
stablecoin issuers, we will regularly review the ongoing accuracy and validity of the algorithm
and potential risks arising from the value support structure which the algorithm maintains. We
acknowledge that fully algorithmic stablecoins do present a higher probability of failure thanasset-backed coins due to a black swan event. Purely algorithmically stabilised projects - which
do not have the backing of any form of collateral - rely solely on the continued confidence ofusers in the system to maintain stability. If enough of that confidence is undermined or lostthen, at a certain point it is understood that the algorithm will simply not be able to maintainthe stability of the token and the project will fail. We will maintain appropriate risk
management, such as automatic liquidation upon specified and disclosed triggers, to mitigate
the potential impact of such events.
c.

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Redemptions - We will implement appropriate policies and procedures to ensure that
redemptions function in the manner set out in the terms applicable to the stablecoin anddisclosed to users including:i.

presentation of stablecoin,ii.

timeframes for settlement. Settlement should be made ‘promptly’, which would bereasonably interpreted as within two business days for cash-backed stablecoins and 10
business days for other product structures, subject to the Standard Exceptions (set out
below);

Deleted: policies covering the main aspects ofredemption including

Deleted: any client identification requirements (e.g.
KYC and AML procedures that must be passed prior
Deleted: pay

1. policies to address redemption and settlement risk (see also sections in thiscode in relation to Pricing and Valuation, Market Integrity and Liquidity and
Fraud). Such policies should also cover risks relating to the Standard
Exceptions; andDeleted: ); and2. ‘Standard Exceptions’ are: any requirement for enhanced due diligence;
market disruption including liquidity issues in respect of cash and/or securities;
structural disruption including change in control/ merger/ delisting/nationalisation in respect of underlying securities; bankruptcy/ insolvency
events in respect of underlying securities issuers; [hedging disruption]; andadditional risks such as [force majeure, change of law].
3. We will ensure to process requests for redemptions for verified clients withina reasonable amount of time subject to banking or custodial hours and thecompletion of enhanced due diligence measures, as applicable.
iii.

any client identification requirements (e.g. KYC and AML procedures that must be
passed prior to pay out).

d. Bankruptcy and Distress - With regard to potential bankruptcy and distress, we:i.

will have a capital adequacy statement in place that states how much capital thecompany will maintain to ensure the safety of the issue assets;

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ii.

will implement and maintain policies and procedures concerning the protection of client
assets in case of financial distress;iii.

acknowledge that to the extent possible, client assets should not be commingled withcompany assets;e. Client assets - Where segregation of assets is implemented, we will have the quality andstrength of that segregation arrangement be attested by way of certified account structure,legal opinion or other verification procedure;f.

Fees - In the event of a decision to increase fees associated with transactions in the stablecoin,
we will use reasonable efforts to disseminate information regarding the proposed fee increase
to existing users (including details of amounts and the proposed effective date) and will offera reasonable period for redemption by existing users at par before the new fee terms become
applicable.

4. MARKET INTEGRITY & LIQUIDITY RISK

Deleted: ¶¶¶¶a. Market and Liquidity Risk - structural mitigationi.

To mitigate secondary market liquidity risk, we will endeavour to make an efficient
two-way market in our stablecoins at any time, in particular in times of distress;ii.

We can provide this liquidity to all market participants, or only to selected dealer
market participants, provided the latter commit to pass this liquidity on to the rest of
the market; andiii.

In case the stablecoin is linked to illiquid assets where a tight market price is notavailable at all times, we acknowledge that it is advisable that this liquidity is notprovided in cash but in kind, i.e. the issuer delivers the underlying assets.

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b. Market and Liquidity Risk - policy and procedure mitigationi.

We will establish policies and procedures addressing the specific liquidity risk of theapplicable collateral assets - i.e. to identify appropriate liquidity factors, monitor thesefactors and to provide procedures that will be implemented if the collateral assets’value cannot readily be realised (including for purposes of funding redemptions) or,
where applicable, delivered in kind.

ii.

We will develop or otherwise obtain and run risk models on an on-going basis that
determine the level of subordination required to prevent market risk, and havepolicies and procedures in place identifying how to deal with market moves thaterode the subordination.

iii.

We will publicly disclose our issuer risk model methodology and target confidence risk
levels.

c. Market and Liquidity Risk - special considerations for structures with collateralcounterpartiesi.

If we issue stablecoins that are asset-backed (as opposed to fiat-backed or
algorithmic, please refer to Key Considerations document for more information) witha non-physical underlying asset, we acknowledge we may have additionalcounterparty risk connected with the collateral.

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1. Example: “synthetic ETF” style stablecoin that is linked to say oil, but where
the collateral is held in bonds, and there is a counterparty that is providing aswap, swapping out the bond risk against oil risk.
ii.

Where this applies, we will also:
1. establish policies to ensure that adequate consideration has been given to thewrong-way-risk of the counterparty holding the collateral assets being
adversely affected by events that impact on its ability to perform on its
obligations;
2. execute swaps under ISDA agreements with reputable institutions wherever
possible, with an adequate margining policy in place; and3. have a treasury function which is capable of dealing with margin calls in timesof distress (in particular, we will implement policies and procedures to ensurethat missing margin payments are identified and addressed in a timely
manner).

5. TREASURY MANAGEMENT
We will ensure adequate provisions and treasury management to allow redemption in a reasonable
timeframe and prevent a run on the financial institution.

a. Liquidity Coverage
We acknowledge that management of reserve assets involves making investment decisions
with respect to the reserve, including with respect to the riskiness of the assets.
i.

Where stablecoin arrangements are supported by reserve assets composed of cash
or cash equivalents, we agree to hold 'high quality liquid assets' to fund cash outflowsfor 30 calendar days.

ii.

Where stablecoin arrangements are supported by reserve assets other than cash or
cash equivalents, we will ensure that the volume and liquidity characteristics ofreserve assets are adequate to fund cash outflows for 30 calendar days or ensure a
one-to-one ratio between reserve assets and the par value of stablecoins
outstanding.

6. DISCLOSURES; TERMS AND CONDITIONS
a. Disclosure and informationi.

ii.

We will provide clear disclosure on the underlying structure of the Stablecoin toenable users to understand the functions, procedures (for example in relation toissuance and redemption), valuation policy, surrounding risks and redemption rights
and timelines (as referenced in further detail above).

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We will take reasonable steps to provide inter alia:

Deleted: Information

1. Clear information on liquidity

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2. Clear information on fees and spreads
3. A up to date list of recommended exchanges and resellers, if the offer, sale,and trade of said stablecoin is regulated

Deleted: Details of where assets are stored/located¶
Provide and keep an updated
Deleted: ‘authorised’

4. Information on the provider including a link to the website and details of
underlying collateralised assets and redeemable assets

Deleted: regulatory page (EXAMPLE)

5. Clear policy on the handling & storage of customer data in compliance withlocal applicable regulations eg GDPRiii.

If we issue asset-backed stablecoins, we will disclose the value and types of assets
held in a manner that allows customers to understand whether the assets are
sufficient to cover the outstanding liabilities including during times of distress.

b. Terms and conditions

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We will provide easy access to the terms and conditions for our Stablecoin issuance,
the terms and conditions will be written in language which is accessible andstraightforward. We acknowledge that our terms and conditions form the basis forthe legal relationship with our users.

ii.

We will give due consideration to situations where we believe amendments may berequired and any amendments that are made will be proportionate to the issues thatthey seek to solve. In situations where amendments may be reasonably consideredadverse to the interests of the Stablecoin users, we will use reasonable efforts todisseminate information regarding the proposed changes to existing users and willoffer a reasonable period for redemption by existing users at par before the newterms become applicable.

c. Policies

Deleted: ¶We will have policies and procedures in place to ensure that our disclosures, thepresentation and content of our terms and conditions, process around and content of
any amendments to our terms and conditions and all customer communications are
deemed fair and proper and we will provide appropriate risk warnings whereapplicable and advance notice of changes wherever possible.

7. CUSTOMERSDeleted: ¶a. Know your Customeri.

Where applicable (please refer to the separate Code in relation to AML and KYC tounderstand more details on applicability of AML/KYC), we will undertake thenecessary checks on customers, and make customers aware that these checks will be
undertaken. These checks may include but are not limited to:
1. Know Your Customer (KYC)
2. Anti Money Laundering (AML)
3. Politically Exposed Persons (PEP)
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4. Counter-Terrorist Financing (CTF)

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5. Proliferation Financing (PF)
6. Sanctions List (SL)b. Customer Funds and Custodyi.

The principles set out in the GDF Custody Code are relevant in relation to theappointment and oversight of custodians for stablecoin assets.

ii.

We will have policies and procedures in place describing how the stablecoin assets areheld in custody and who are the beneficial ownersiii.

If a stablecoin is backed by an asset, and the asset itself is held, we will hold the assets
in custody pursuant to regulatory and industry best practices regarding asset
safekeeping and business contingency
1. If we are providing custody of client assets in a decentralised manner, we will
do so in a manner that promotes confidence in the decentralisation of asset
custody. This includes, but is not limited to, high levels of ongoing diligence toensure that there is no central point of failure among custodians, or exploits
in smart contracts that could affect the underlying assets’ liquidity

iv.

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Where appropriate, we will implement governance and technical structures
surrounding control and security of the keys related to update of the stablecoin smart
contract to address risks concerning inter alia:
1. the loss, destruction, or corruption of private keys; and2. adequate checks and balances including separation of powers to avoid any
single individual having undue control over the underlying contract addressprivate keys.

v.

To the extent possible private keys relating to authentication and deployment of theunderlying smart contract should be held in a manner consistent with the GDF
Custody Code.

Deleted: documentc. Conflict Resolutioni.

We will put in place a clearly documented and communicated complaints procedure,
detailing

Deleted: how a customer can make a complaint andto whom a complaint should be addressed (eg to theissuer or the seller / exchange).

1. how a customer can make a complaint
2. to whom a complaint should be addressed (eg to the issuer or the seller /exchange).
3. Outline the complaints process and what steps will be taken towards
resolving it
ii.
iii.

These procedures must ensure that a complaint may be made free of charge andallow complaints to be made by any reasonable means.
We agree that within 8 weeks from the receipt of a complaint which is eligible inaccordance with the specified complaints procedure, our final response will be given
to the claimant
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8. GOVERNANCE
a. General Governance Principlesi.

We will ensure that all of our policies and procedures are regularly reviewed andupdated as necessary will monitor our performance against these policies andproceduresii.

We will maintain a register of all major operational or security incidents, and theincident register will be periodically reviewed.

iii.

Where regulatory frameworks exist, we will fully comply with all applicablerequirements defined within the regulatory perimeter.

b. Technology
i.

ii.

iii.

Deleted: ¶We will consider, based on reasonably available information (and with respect toprivate platforms, as may be supplemented by responses to appropriate due
diligence) the overall strength and resilience of the underlying blockchain platformthat we are using, with a view to issuing stablecoin using resilient systems andmitigating technology risk.

Deleted: ensure
Deleted: whether public or private.

For public blockchains we will evaluate on an ongoing basis
1. the risk of a compromise / attack of the underlying blockchain, particularly
those based on proof-of-work or proof-of-stake consensus
2. the risk of hard forks and resulting potential contention and other associatedrisks
For private blockchains we will monitor on an ongoing basis the fundamental
consensus algorithm (eg proof-of-authority, proof-of-stake) and identify and mitigate
primary factors involving potential compromises and attack vectors

iv.

We will appropriately test and approve all code changes and patches before they are
deployed within the production blockchainv.

We will put in place a process to ensure that all smart contract code changes areapproved, in accordance with internal governance processes and best industry
practices.

vi.

Deleted: documented
Deleted: by an authorised individual

We will undertake a regular review of the underlying blockchain API and mechanism
through which the smart contract interacts as the blockchain updates or modifies
those mechanisms, particularly if the change necessitates a hard fork of theunderlying blockchain

c. Reconciliation and Audit
i.

ii.

iii.

We will establish, implement and maintain an audit plan to examine and evaluate theadequacy and effectiveness of our systems, internal control mechanisms andgovernance arrangements

Deleted: ;Deleted: regular financial audits

For fiat and asset backed stablecoins, we will submit to audited periodic attestation
to confirm that we maintain sufficient underlying assets to meet redemption
requirements. We will ensure that our algorithmic backed smart contracts haveprotections in place to demonstrate the resilience in pricing mechanism(s)Deleted: cover our outstanding liabilities ¶We will implement regular audits of changes to the stablecoin smart contracts,,
including a technical audit in accordance with internal control mechanisms andgovernance arrangements

Deleted: Algo

Deleted: we have sufficient assets to match thecapital utilised for an asset-backed stablecoin ¶We will ensure that

Deleted: , undertaken by an independent third party,
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iv.

We will maintain an auditable log of all smart contract code updates and ensure thata continuous audit trail of changes existsv.

In the event of reconciliation or audit revealing insufficient underlying assets and/or
liquidity reserves and/or capital, we will ensure that our internal governance model
enacts relevant red flag and resolution processes, followed by further reconciliation
or audit as applicable to verify rectification within a reasonable timeframe

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