Article (22): Management and Safekeeping of the Reserve of Assets

2/2024 Issued on 14/6/2024

Requirement for a Reserve of Assets

1.

A Licensed Payment Token Issuer must have in place an effective and robust system to protect and manage the Reserve of Assets to ensure that the constituent assets:

a)	are deployed for the prescribed usage only;
b)	are protected against claims by other creditors of the Licensee in all circumstances; and
c)	are protected from operational and other relevant risks.

Composition of the Reserve of Assets

2.

A Licensed Payment Token Issuer must hold the Reserve of Assets as cash in a separate escrow account that:

a)	is wholly denominated in the same currency as the Payment Tokens in relation to which it is held;
b)	it holds in its name with another Person not in its Group which is a Bank licensed in the UAE;
c)	is designated in such a way as to show that it is an account which is held for the purpose of safeguarding the Reserve of Assets in accordance with this Regulation; and
d)	is used only for holding that Payment Token Issuer’s Reserve of Assets.

3.

Where a Licensed Dirham Payment Token Issuer is a wholly-owned subsidiary of a Bank, it may choose, as an alternative to holding 100% of the Reserve of Assets in accordance with Article (22)2, to hold at least 50% of the Reserve of Assets as cash in accordance with Article (22)2 and invest the remaining portion of the Reserve of Assets in UAE government bonds and Central Bank of the UAE Monetary Bills (M-bills) that have an average duration of 6 months or less. If the Dirham Payment Token Issuer makes such a choice, it must hold regulatory capital in accordance with Article (13)2.

4.

The Central Bank may require a Licensed Payment Token Issuer to hold the Reserve of Assets as cash in an account held with the Central Bank, rather than on one of the other bases permitted under this Article (22).

Protection of the Reserve of Assets

5.	A Licensed Payment Token Issuer must put in place an effective contractual arrangement to ensure that, in the event of its insolvency, its Customers have a legal right and claim to payment of all amounts owed on the redemption of their Payment Tokens from the Reserve of Assets. A Licensed Payment Token Issuer shall, at the request of the Central Bank, seek an external legal opinion on the protection arrangement of the Reserve of Assets to ensure the legal soundness of the arrangements, and commission an independent review to ensure the operational soundness.
6.	A Licensed Payment Token Issuer must ensure that no other Person has any claim on or interest in the Reserve of Assets.
7.	The Reserve of Assets held in relation to one type of Payment Token must be segregated (including being held in a different account or Wallet) from that held in relation to any other type of Payment Token.

Management of the Reserve of Assets

8.

A Licensed Payment Token Issuer must ensure that the value of its Reserve of Assets amounts at least to the total Fiat Currency face value of Payment Tokens in circulation, including without limitation by putting in place:

a)	an adequate process to ensure timely and accurate records of cash or Payment Tokens paid into and out of a Reserve of Assets, with appropriately regular reconciliation between system records and the actual Reserve of Assets (e.g. balances of the account or Wallet holding the Reserve of Assets). Such reconciliation must be done at least on a daily basis and reported to the Central Bank daily;
b)	a monthly audit by an External Auditor, who is not an officer or employee of the Payment Token Issuer or an officer or employee of another company or undertaking in its Group, to confirm that, during the course of the preceding month, the value of its Reserve of Assets amounted at all times at least to the total Fiat Currency face value of Payment Tokens in circulation; and
c)	effective internal control measures and procedures, which constitute an integral part of the Licensee’s or Registree’s overall robust internal control system, to protect the Reserve of Assets from possible misappropriation and all operational risks, including the risk of theft, fraud and misappropriation.