SIO-6 Reserve Asset & Redemption Right
SIO-6.1 Reserve Asset Composition and Management
SIO-6.1.1
Stablecoin issuers, at all times, must hold and maintain sufficient reserve assets such that the value of the reserve assets must be equivalent to at least one hundred percent (100%) of the par value of the outstanding approved stablecoins in circulation, including those held by the licensee.
Added: July 2025SIO-6.1.2
Stablecoin issuers must ensure that the reserve assets held are:
(a) denominated in the same reference currency i.e. the fiat currency that the approved stablecoin purports to represent (except for Bahraini Dinar denominated stablecoin (see Paragraph SIO-6.1.8));(b) sufficient in value to back each one of the approved stablecoins issued;(c) stable in value; and(d) sufficiently liquid to meet the permanent right of redemption of the clients.Added: July 2025SIO-6.1.3
For the purposes of Paragraph SIO-6.1.1, stablecoin issuers must ensure that the reserve assets are valued on a daily basis by using their current market value i.e. the reserve assets are marked to market on a daily basis for the purpose of valuation.
Added: July 2025SIO-6.1.4
When using mark-to-market valuation the reserve assets must be valued at the prudent side of the bid and offer unless the reserve assets can be closed out at mid-market value. Only market data of good quality should be used, and data should be assessed on all of the following factors:
(a) the number and quality of counterparties;(b) the volume and turnover in the market of the reserve asset;(c) the total size of the reserve asset.Added: July 2025SIO-6.1.5
Where use of mark-to-market as referred to Paragraph SIO-6.1.3 is not possible or the market data is not of sufficiently good quality, the reserve asset must be valued conservatively by using mark-to-model. The model should accurately estimate the intrinsic value of the reserve asset, based on all of the following up-to-date key factors:
(a) the volume and turnover in the market of that reserve asset;(b) the total size of the reserve asset;(c) the market risk, interest rate risk and credit risk attached with the reserve asset.Added: July 2025Composition of Reserve Assets
SIO-6.1.6
Stablecoin issuers must ensure that the reserve assets are of high quality and high liquidity with minimal market, credit and concentration risk. In determining the composition of the reserve assets, stablecoin issuers must take into account the liquidity requirements of the approved stablecoin under consideration and how the reserve assets will be managed and invested without any risk to clients permanent right of redemption.
Added: July 2025SIO-6.1.7
Stablecoin issuers must ensure that the composition of reserve assets only includes the following:
(a) Cash and deposits callable at one day notice held with banks rated at a minimum AA- or equivalent. The CBB recognises Standard and Poor’s, Moody’s, Fitch as eligible credit rating agencies. With respect to the possible recognition of other rating agencies as eligible credit rating agencies, the stablecoin issuer should undertake discussion with the CBB and provide the CBB with necessary information and justification;(b) Debt securities with residual maturity of 90 days or less issued by the central bank of the reference currency;(c) Repurchase agreement with a maturity of 7 days or less which are backed by (b) above; and(d) Short term government money market funds.Added: July 2025SIO-6.1.8
In addition to the requirement of Paragraph SIO-6.1.7, stablecoin issuers issuing Bahraini Dinar (BHD) backed approved stablecoins can invest in US Dollar (USD) denominated T-bills with residual maturity of 90 days or less issued by the central bank of the reference currency.
Added: July 2025Segregation of Reserve Assets
SIO-6.1.9
Stablecoin issuers must put in place effective arrangement to ensure that the:
(a) reserve assets are legally segregated from the licensee’s own assets so that creditors of the stablecoin issuers have no recourse to the reserve assets in the event of insolvency; and(b) reserve assets are operationally segregated from the stablecoin issuer’s own assets.Added: July 2025SIO-6.1.10
Stablecoin issuers that offer two or more approved stablecoins must operate and maintain segregated pools of reserves assets for each approved stablecoin. Each of those pools of reserves assets must be managed separately.
Added: July 2025SIO-6.1.11
Stablecoin issuers must put in place effective internal control measures and procedures to protect the reserve assets from operational risks, including the risks of theft, fraud and misappropriation.
Added: July 2025SIO-6.1.12
Stablecoin issuers must put in place an investment policy for the reserve assets which should be reviewed for suitability on an annual basis or more frequently depending on the nature, size and complexity of the business.
Added: July 2025SIO-6.1.13
Stablecoin issuers must appoint a qualified person as head of reserve asset management with appropriate authority to implement the investment policy referred to in Paragraph SIO-6.1.12. The appointed person shall be responsible for effective implementation of the investment policy.
Added: July 2025SIO-6.1.14
Stablecoin issuers must ensure that the issuance and redemption of approved stablecoin is always matched by a corresponding increase or decrease in the reserve assets.
Added: July 2025SIO-6.2 Audit Requirements of Reserve Assets
SIO-6.2.1
Stablecoin issuers must, on a monthly basis, obtain a report by an independent external audit firm confirming the following:
(a) the approved stablecoin is one hundred percent backed by reserve assets;(b) the number and market value of approved stablecoin in circulation; and(c) the composition and value of the reserve assets.Added: July 2025SIO-6.2.2
The report referred to in Paragraph SIO-6.2.1 must be submitted to the CBB and published on the stablecoin issuer’s website by the end of the following month for the month being reported.
Added: July 2025SIO-6.3 Reconciliation and Addressing Discrepancies
Reconciliation
SIO-6.3.1
Stablecoin issuers must conduct internal and external reconciliation on a daily basis. For internal reconciliation, stablecoin issuers must compare, as per their own records, the value of reserve assets against the par value of the approved stablecoins in circulation and check whether the value matches. For external reconciliation, stablecoin issuers must compare their internal records of reserve asset valuation and par value of approved stablecoins in circulation with the records of any third party with whom the reserve assets are being held.
Added: July 2025Addressing Discrepancies: Excess
SIO-6.3.2
Upon daily valuation and reconciliation of the reserve assets, if the value of the reserve assets is in excess of the par value of the approved stablecoins in circulation, the excess amount must be removed from the reserve assets account within one business day and transferred into the stablecoin issuer’s own account.
Added: July 2025Addressing Discrepancies: Shortfall
SIO-6.3.3
Upon daily valuation and reconciliation of the reserve assets, if the value of the reserve assets is less than the par value of the approved stablecoins in circulation, licensee must top up the shortfall amount at the earliest but no later than 1 business day. The stablecoin issuer must top up any identified shortfall from their own liquid resources. The CBB must be immediately notified about the shortfall, its value and the measures taken by the licensee to top up the shortfall.
Added: July 2025SIO-6.4 Custody of Reserve Assets
SIO-6.4.1
Stablecoin issuers must establish, maintain and implement custody policies, procedures and contractual arrangements that ensure at all times that:
(a) the reserve assets are neither encumbered nor pledged as a financial collateral arrangement;(b) the reserve assets are held with a third party i.e. a bank or an investment firm or a custodian;(c) the stablecoin issuer has prompt access to the reserve assets to meet any requests for redemption from the clients of approved stablecoins; and(d) risk of concentration of reserve assets is avoided.Added: July 2025SIO-6.4.2
The custody policies and procedures referred to in Paragraph SIO-6.4.1 must set out the selection criteria for the appointment of banks, investment firms and custodians to safeguard the reserve assets and the procedure for reviewing such appointments. Stablecoin issuers must review the appointment of banks, investment firms, and custodians for safeguarding the reserve assets on an annual basis or more frequently. For the purpose of review stablecoin issuers must evaluate their exposures to the banks, investment firms and custodians, taking into account the full scope of their relationship with them, and monitor the financial conditions of such entities on an ongoing basis.
Added: July 2025SIO-6.4.3
For the purposes of SIO-6.4.1(b) (safeguarding the reserve assets), a stablecoin issuer can (i) manage the reserve assets by holding them with a bank and an investment firm or (ii) appoint a custodian to manage the reserve assets. In either case, the stablecoin issuer is legally responsible for ensuring that the reserve assets are safeguarded appropriately and the stablecoin issuer will be subject to the regulatory requirements that are stipulated for reserve assets.
Added: July 2025SIO-6.4.4
Stablecoin issuers who issue two or more approved stablecoins must have a custody policy in place for each pool of reserve assets.
Added: July 2025SIO-6.4.5
The reserve assets must be held in custody no later than five business days from the date of issuance of the approved stablecoin.
Added: July 2025SIO-6.4.6
Stablecoin issuers must exercise all due skill, care and diligence in the selection, appointment and review of banks, investment firms and custodians of the reserve assets.
Added: July 2025SIO-6.4.7
Stablecoin issuers must ensure that the banks, investment firms and custodians of the reserve assets have the necessary expertise and market reputation to safeguard the reserve assets, taking into account the accounting practices, safekeeping procedures and internal control mechanisms of those entities.
Added: July 2025SIO-6.4.8
The appointment of custodians of the reserve assets must be done through a contractual agreement. The contractual agreement must, amongst others, regulate the flow of information necessary to enable the stablecoin issuer and the custodians to perform their functions.
Added: July 2025SIO-6.4.9
The appointed custodians must act honestly, fairly, professionally, independently and in the interest of the stablecoin issuer and its clients.
Added: July 2025SIO-6.4.10
The appointed custodians must not carry out activities with regard to the stablecoin issuer that might create conflicts of interest between the stablecoin issuer, the clients of the stablecoin issuer and themselves unless all of the following conditions are met:
(a) the custodians have functionally and hierarchically separated the performance of their custody tasks from their potentially conflicting tasks;(b) the potential conflicts of interest have been properly identified, monitored, managed and disclosed by the stablecoin issuers to their clients, in accordance with Section SIO-5.9.Added: July 2025SIO-6.5 Permanent Right of Redemption
SIO-6.5.1
Stablecoin issuers must, at all times, ensure that holders of approved stablecoins have a direct legal right to redeem the approved stablecoins for the pegged fiat currency at par value.
Added: July 2025SIO-6.5.2
Stablecoin issuers must ensure that all legitimate redemption requests are processed at par value and completed:
(a) within five business days; or(b) if the trading and/or settlement of the reserve assets are subject to significant disruption events beyond the control of the licensee, within one business day of the trading and/or settlement of reserve assets no longer being significantly impacted by such disruption events.Redemption requests will be considered as processed when the stablecoin issuer completes the fund transfer process at their end and does not include the time it takes for the funds to reach the client account.
Added: July 2025SIO-6.5.3
For the purposes of Paragraph SIO-6.5.2, a redemption request is generally deemed as legitimate if the client can meet the stablecoin issuers onboarding requirements, including the applicable customer onboarding rules to mitigate ML/TF risks.
Added: July 2025SIO-6.5.4
Where a stablecoin issuer imposes any type of fees or charges, whether directly or indirectly, on redemption, such fees or charges must be reasonable and must not be set at a very high level to deter the clients from exercising their right to redemption. Stablecoin issuers must clearly communicate the fees and charges on redemption.
Added: July 2025SIO-6.5.5
Stablecoin issuers must establish, maintain and implement clear and detailed policies and procedures for redemption. The redemption policy and procedure must be disclosed on the stablecoin issuer’s website.
Added: July 2025SIO-6.5.6
Stablecoin issuers must prominently state the conditions and procedures for redemption in the stablecoin whitepaper and on the stablecoin issuer’s website. Any condition that the stablecoin issuer wishes to impose for redemption must be reasonable.
Added: July 2025SIO-6.5.7
Where stablecoin issuers retain any approved stablecoin for re-circulation following redemption, the retention must be done in accordance with the requirements stipulated Paragraph SIO-5.1.4 i.e. the stablecoin issuer must ensure that the retained approved stablecoins are fully backed by reserve assets.
Added: July 2025SIO-6.5.8
Where a stablecoin issuer uses the services of third parties for the purpose of redemption of approved stablecoin for fiat currency, the stablecoin issuer must ensure that the redemption is done at par value, without any restriction and in accordance with the requirements of this Section. However, where the third-party channels are unable to meet the redemption requests of clients, stablecoin issuers must provide direct redemption rights for such holders without any restrictions
Added: July 2025SIO-6.6 Interest and Reward
SIO-6.6.1
A stablecoin issuer may issue yield bearing approved stablecoins which pay passive returns to its clients only from the interest or rewards (for sharia complaint stablecoins) earned from the investment of the reserve assets.
Added: July 2025SIO-6.6.2
Stablecoin issuers offering a yield bearing approved stablecoin must set the yield rate or reward rate at a level that is reasonable and does not adversely affect the stability of the approved stablecoin as well as the financial health (going concern) of the stablecoin issuer.
Added: July 2025SIO-6.6.3
A stablecoin issuer offering a yield bearing approved stablecoin must on an annual basis provide the CBB with its yield or reward policy as well as an internal assessment report, approved by the board, on the impact of yield or reward payment on the financial health of the stablecoin issuer. The aforementioned assessment report for a financial year must be provided to the CBB no later than 60 days prior to the start of the reference financial year.
Added: July 2025SIO-6.6.4
Stablecoin issuers offering yield bearing approved stablecoins must provide the following details in the stablecoin whitepaper:
(a) the methodology to determine the interest rate or reward;(b) whether the interest rate or reward is linked to any benchmark (an interest rate benchmark), if yes information about the interest rate benchmark;(c) the frequency of calculation of interest or reward as well as the frequency of credit of interest or reward (record date and time); and(d) form in which the interest or reward will be credited (in the form of approved stablecoins or fiat currency).Added: July 2025Disclosure Requirements
SIO-6.6.5
Stablecoin issuers offering a yield bearing approved stablecoin must ensure that clients are able to access its reviewed quarterly financial statements no later than 45 days from the end of each of the first 3 quarters as well as audited annual financial statements no later than 60 days from the end of the stablecoin issuer’s financial year.
Added: July 2025SIO-6.6.6
A stablecoin issuer offering yield bearing approved stablecoin must immediately announce any event with a material effect on the ability of the clients to receive yield.
Added: July 2025SIO-6.6.7
A stablecoin issuer offering yield bearing approved stablecoin must disclose all information considered material. Information would be regarded as material if its omission or misstatement could change or influence the assessment or decision of a client relying on the information for the purpose of making economic decisions.
Added: July 2025SIO-6.6.8
A yield bearing approved stablecoin will be considered a security and the CBB, at its sole discretion, may impose additional requirements on the stablecoin issuer including additional disclosure requirements similar to those applicable to securities post issuance of the yield bearing approved stablecoin.
Added: July 2025SIO-6.6.9
For the purposes of SIO-8, the CBB, while imposing additional requirements on yield bearing approved stablecoins, shall take into consideration various factors related to establishment of a fair and transparent market such as but not limited to investor protection, conflict of interest, impact on financial market and economic growth, and market efficiency and stability
Added: July 2025
