CASS 16 Annex 2 Guidance on the use of the acknowledgement letter template

This annex contains guidance on the use of the template acknowledgement letter in CASS 16 Annex 1.

Under CASS 16.7.2R, qualifying stablecoin issuers are required to have in place a duly signed and countersigned backing asset pool acknowledgement letter for backing funds accounts and backing assets accounts (other than for such accounts provided by the Bank of England).

For each account, a qualifying stablecoin issuer is required to complete, sign and send to the approved bank or third-party custodian (‘the counterparty’) an acknowledgement letter identifying that account, in the form set out in CASS 16 Annex 1.

When completing an acknowledgement letter using the appropriate template, a qualifying stablecoin issuer is reminded that it must not amend any of the text which is not in square brackets (acknowledgement letter fixed text). A qualifying stablecoin issuer may remove and replace square bracketed text (acknowledgement letter variable text) with the required information, as appropriate. The notes below give further guidance on this.

A qualifying stablecoin issuer is reminded that for each backing funds account or backing assets account it needs to have in place an acknowledgement letter. As a result, it is important that it is clear to which account or accounts each acknowledgement letter relates. The template in CASS 16 Annex 1 requires that the acknowledgement letter includes the full title and at least 1 unique identifier, such as a sort code and account number, deposit number or reference code, for each account.

The title and unique identifiers included in an acknowledgement letter for an account should be the same as those reflected in both the records of the qualifying stablecoin issuer and the relevant counterparty, as appropriate, for that account. Where a counterparty’s systems are not able to reflect the full title of an account, that title may be abbreviated to accommodate that system, provided that:

A qualifying stablecoin issuer should ensure that all relevant account information is contained in the space provided in the body of the acknowledgement letter. Nothing should be appended to an acknowledgement letter.

In the space provided in the template letter for setting out the account title and unique identifiers for each relevant account, a qualifying stablecoin issuer may include the required information in the format of the following table:

Where an acknowledgement letter is intended to cover a range of accounts, some of which may not exist as at the date the acknowledgement letter is countersigned by the counterparty, a qualifying stablecoin issuer should set out in the space provided in the body of the acknowledgement letter that it is intended to apply to all present and future accounts which:

For example, in the space provided in the template letter in CASS 16 Annex 1 which allows a qualifying stablecoin issuer to include the account title and a unique identifier for each relevant account, a qualifying stablecoin issuer should include a statement to the following effect:

A qualifying stablecoin issuer should ensure that each acknowledgement letter is signed and countersigned by all relevant parties and individuals (including where more than one signatory is required).

An acknowledgement letter that is signed or countersigned electronically should not, for that reason alone, result in a breach of the rules in CASS 16.7. However, where electronic signatures are used, a qualifying stablecoin issuer should consider whether, taking into account the governing law and choice of competent jurisdiction, it needs to ensure that the electronic signature and the certification by any person of such signature would be admissible as evidence in any legal proceedings in the relevant jurisdiction in relation to any question as to the authenticity or integrity of the signature or any associated communication.

A qualifying stablecoin issuer should use at least the same level of care and diligence when completing an acknowledgement letter as it would in managing its own commercial agreements.

A qualifying stablecoin issuer should ensure that each acknowledgement letter is legible (eg, any handwritten details should be easy to read), produced on the qualifying stablecoin issuer’s own letter-headed paper, dated and addressed to the correct legal entity (eg, where the counterparty belongs to a group of companies).

A qualifying stablecoin issuer should also ensure that each acknowledgement letter includes all the required information (such as account names and numbers, the parties’ full names, addresses and contact information, and each signatory’s printed name and title).

A qualifying stablecoin issuer should similarly ensure that no square brackets remain in the text of each acknowledgement letter (eg, after having removed and replaced square bracketed text as appropriate) and that each page of the letter is numbered.

A qualifying stablecoin issuer should complete an acknowledgement letter so that no part of the letter can be easily altered (eg, the letter should be signed in ink rather than pencil).

In respect of the acknowledgement letter’s governing law and choice of competent jurisdiction (see paragraphs (12) and (13) of the template acknowledgement letter), a qualifying stablecoin issuer should agree with the counterparty and reflect in the letter that the laws of a particular jurisdiction will govern the acknowledgement letter and that the courts of that same jurisdiction will have jurisdiction to settle any disputes arising out of, or in connection with, the acknowledgement letter, or its subject matter or formation.

If a qualifying stablecoin issuer does not, in any acknowledgement letter, utilise the governing law and choice of competent jurisdiction that is the same as either or both:

A qualifying stablecoin issuer is required under CASS 16.7.8R to use reasonable endeavours to ensure that any individual who has countersigned an acknowledgement letter returned to the qualifying stablecoin issuer was authorised to countersign the letter on behalf of the relevant counterparty.

If an individual who has countersigned an acknowledgement letter does not provide the qualifying stablecoin issuer with sufficient evidence of their authority to do so, the qualifying stablecoin issuer is expected to make appropriate enquiries to satisfy itself of that individual’s authority.

Evidence of an individual’s authority to countersign an acknowledgement letter may include a copy of the counterparty’s list of authorised signatories, a duly executed power of attorney, use of a company seal or bank stamp, and/or material verifying the title or position of the individual countersigning the acknowledgement letter.

A qualifying stablecoin issuer should ensure it obtains at least the same level of assurance over the authority of an individual to countersign the acknowledgement letter as the qualifying stablecoin issuer would seek when managing its own commercial arrangements.

If a qualifying stablecoin issuer uses a third-party administrator to carry out the administrative tasks of drafting, sending and processing an acknowledgement letter, the following text should be inserted to confirm that the acknowledgement letter was signed by the third-party administrator on behalf of the qualifying stablecoin issuer:

In these circumstances, the qualifying stablecoin issuer should first provide the third-party administrator with the requisite authority (such as a power of attorney) before the third-party administrator will be able to sign the acknowledgement letter on the qualifying stablecoin issuer’s behalf. A qualifying stablecoin issuer should also ensure that the acknowledgement letter continues to be drafted on letter-headed paper belonging to the qualifying stablecoin issuer.

A qualifying stablecoin issuer must ensure that each of its accounts uses a name which corresponds to the appropriate term in the Glossary. This means that all accounts should include the term ‘stablecoin backing funds’ or ‘stablecoin backing assets’ in their title.

All references to the term ‘stablecoin backing funds account’ or ‘stablecoin backing assets account’ in an acknowledgement letter should also be made consistently in either the singular or plural, as appropriate.