You are viewing CASS 16.4 Records and reconciliations as it appeared on 25/10/2027. The current version of CASS 16.4 Records and reconciliations was last updated on 25/10/2027.

CASS 16.4 Records and reconciliations

Policies and procedures

25/10/2027R

All of the rules in this section are to be read as imposing requirements on a firm separately in relation to each qualifying stablecoin product.

25/10/2027R
  1. (1) A firm must establish, implement and maintain adequate policies and procedures sufficient to ensure its compliance with this chapter, including in relation to any services provided through a third party.
  2. (2) The policies and procedures in (1) must include at least the following:
    1. (a) the frequency and method of the reconciliations the firm is required to carry out under this section;
    2. (b) the resolution of reconciliation discrepancies under this section;
    3. (c) the approach to the valuation of an asset for the purposes of CASS 16.2.6R; and

    4. (d) the frequency with which the firm is required to review its arrangements in compliance with this chapter.

       

Records

25/10/2027R

A firm must keep such records and accounts as are necessary to enable it, at any time and without delay, to distinguish between:

  1. (1) the money and assets in the backing asset pool held for the holders of a qualifying stablecoin;
  2. (2) the money and assets in the backing asset pool held for the holders of another qualifying stablecoin that forms part of a different qualifying stablecoin product; and
  3. (3) its own money or assets.
25/10/2027R

A firm must at all times maintain its records and accounts in a way that ensures their accuracy, particularly in relation to the backing asset pool, including:

  1. (1) the value of money and assets that should be held in the backing asset pool in one or more backing funds accounts or backing assets accounts;
  2. (2) the location of money and assets in the backing asset pool;
  3. (3) the identity of those providing backing assets accounts or backing funds accounts; and
  4. (4) the value of the money and assets in the backing asset pool.
25/10/2027R

For each internal safeguarding reconciliation and external safeguarding reconciliation, a firm must keep records of:

  1. (1) the time and date it carried out the relevant process;
  2. (2) the actions it took in carrying out the relevant process;
  3. (3) the outcome of its calculations of the amount safeguarded in the backing asset pool and the amount that should be safeguarded in accordance with CASS 16, including whether any discrepancies were identified; and
  4. (4) the value of any excess held in the backing asset pool in accordance with CASS 16.4.16R.
25/10/2027R

Unless otherwise stated, a firm must ensure that any record made under this chapter is retained for a period of 5 years starting from the later of:

  1. (1) the date the record was created; or
  2. (2) if the record has been modified since the date it was created, the date it was most recently modified.

Internal safeguarding reconciliation

25/10/2027R

An internal safeguarding reconciliation requires a firm to reconcile its internal records and accounts of the amount it safeguards in the backing asset pool for the holders of a qualifying stablecoin with its internal records and accounts of the amount it should safeguard in that backing asset pool (see CASS 16.2.1R(3)).

25/10/2027R

In carrying out an internal safeguarding reconciliation, a firm must:

  1. (1) disregard any excess held in accordance with CASS 16.4.16R when calculating the amount it should safeguard in the backing asset pool; and
  2. (2) use the values contained in its internal records, and not records provided by third parties with which it has placed the money or assets in the backing asset pool.
25/10/2027R

A firm must carry out an internal safeguarding reconciliation:

  1. (1) as regularly as necessary and at least once each business day; and
  2. (2) based on the most up-to-date records of the firm.

External safeguarding reconciliation

25/10/2027R

An external safeguarding reconciliation is a reconciliation between a firm’s internal records and accounts and those of:

  1. (1) any person with whom a firm has a backing funds account; and
  2. (2) any person with whom a firm has a backing assets account.
25/10/2027G

The purpose of an external safeguarding reconciliation is to ensure the accuracy of a firm’s internal records and accounts against those of any third parties that hold money or assets on behalf of that firm for the benefit of holders of a qualifying stablecoin.

25/10/2027R

A firm must carry out an external safeguarding reconciliation as regularly as necessary and at least once each business day.

25/10/2027R

When carrying out an external safeguarding reconciliation, a firm must: 

  1. (1) compare:
    1. (a) the balance of funds on each backing funds account as recorded by the firm, with the balance on that account as set out in the statement or other form of confirmation issued by the person with whom that account is held; and
    2. (b) the balance of assets, investment by investment, on each backing assets account, with the balance of those assets as set out in the statement or other form of confirmation issued by the person with whom the account is held; and
  2. (2) promptly identify and resolve any discrepancies between those balances in accordance with CASS 16.4.21R.
25/10/2027G

When carrying out the reconciliation described in CASS 16.4.13R in relation to assets, a firm is required to reconcile the quantity of assets it has recorded with the quantity of assets a third party has recorded, in addition to the value of those assets. An example would be that a firm should compare its records of the number of units in a particular money market fund with the number of units in that money market fund as set out in the statements provided by the custodian of the units, in addition to the value of those units.

Identifying and resolving discrepancies

25/10/2027R

When a firm becomes aware of a discrepancy between the value of a backing asset pool and the relevant reference value multiplied by the relevant stablecoin pool, the firm must: 

  1. (1) determine the reason for that discrepancy; and
  2. (2) subject to CASS 16.4.16R, ensure the discrepancy is resolved in accordance with paragraph (a) or (b) below:
    1. (a) the firm must adjust the value of the backing asset pool by ensuring that either:
      1. (i) any shortfall is paid into a backing funds account or invested in assets held in a backing assets account; or
      2. (ii) any excess is withdrawn from a backing funds account or backing assets account; or
    2. (b) the firm must adjust the value of the stablecoin pool by ensuring that either:
      1. (i) any excess of qualifying stablecoins which have been minted but are not represented by money or assets in the backing asset pool are burned; or
      2. (ii) any shortfall of qualifying stablecoins which has led to an excess of value in the backing asset pool is resolved by the minting of additional qualifying stablecoins with no corresponding adjustment to the money or assets held in the backing asset pool.
25/10/2027R
  1. (1) Where an internal safeguarding reconciliation identifies an excess, this rule applies to that part of the excess with a value of up to 5% of the relevant reference value multiplied by the relevant stablecoin pool.
  2. (2) The firm may:
    1. (a) withdraw none, some or all of that part of the excess in accordance with CASS 16.4.15R(2)(a)(ii); and
    2. (b) retain none, some or all of that part of the excess in the backing asset pool.
25/10/2027G

CASS 16.4.16R allows firms to hold an excess in the backing asset pool after an internal safeguarding reconciliation. Any such excess is part of the backing asset pool so is held on trust under CASS 16.5.2R and cannot be withdrawn except in accordance with CASS 16.4.15R and CASS 16.4.16R. Under CASS 16.4.8R(1), any such excess is ignored when calculating how much should be in the backing asset pool for the purposes of internal safeguarding reconciliations.

25/10/2027R

The resolution of a discrepancy referred to in CASS 16.4.15R must be carried out as soon as possible, and in any event no later than the end of the business day on which the firm becomes aware of the discrepancy.

25/10/2027G

CASS 16.4.15R sets out some of the steps that a firm must carry out to ensure that it is segregating the correct amount on aggregate of money and assets in the backing asset pool. Where a discrepancy is identified the firm must either adjust the amount in the backing asset pool or the value of the relevant stablecoin pool to address it (subject to CASS 16.4.16R). 

25/10/2027G

Where a discrepancy referred to in CASS 16.4.15R has arisen as a result of a breach of the requirements of this chapter, a firm should ensure it takes sufficient steps to avoid a recurrence of that breach. 

25/10/2027R

If a discrepancy is identified by an external safeguarding reconciliation carried out under CASS 16.4.12R, the firm must investigate the reason for the discrepancy and take all reasonable steps to resolve it without undue delay unless the discrepancy arises solely as a result of timing differences between the accounting systems of the person providing the statement or confirmation and that of the firm.

Notification requirements

25/10/2027R

A firm must inform the FCA in writing without delay if: 

  1. (1) its internal records and accounts of the backing asset pool are materially out of date, inaccurate or invalid so that the firm is no longer able to comply with the requirements in CASS 16.4.3R or CASS 16.4.4R;
  2. (2) it will be unable to, or materially fails to, conduct an internal safeguarding reconciliation in compliance with CASS 16.4.7R to CASS 16.4.9R;
  3. (3) it will be unable to, or materially fails to, adjust the value of the backing asset pool or stablecoin pool in accordance with CASS 16.4.15R to CASS 16.4.18R;
  4. (4) it will be unable to, or materially fails to, conduct an external safeguarding reconciliation in compliance with CASS 16.4.10R to CASS 16.4.13R;
  5. (5) it will be unable to, or materially fails to, identify and resolve any discrepancies in accordance with CASS 16.4.21R; or
  6. (6) it becomes aware that, at any time in the preceding 12 months, the value of the backing asset pool was materially different from the relevant reference value multiplied by the relevant stablecoin pool, except for any excess held in accordance with CASS 16.4.16R.
Point In Time
25/10/2027