You are viewing CRYPTO 2.3 Appointment of third parties as it appeared on 25/10/2027. The current version of CRYPTO 2.3 Appointment of third parties was last updated on 25/10/2027.

CRYPTO 2.3 Appointment of third parties

Application

25/10/2027G

The general application of CRYPTO 2 is set out in CRYPTO 2.1.

25/10/2027R

This section applies to activities that are critical for the performance of, or amount to part of, the regulated activity of issuing a qualifying stablecoin, including:

  1. (1) the making or accepting of an offer to buy or subscribe to a qualifying stablecoin;
  2. (2) the redemption of a qualifying stablecoin; and
  3. (3) the carrying out of activities designed to maintain the stable value of a qualifying stablecoin, other than the provision of accounts referred to in CASS 16.6.1R.
25/10/2027G

In so far as a firm wishes to engage a third party to carry out activities not within scope of CRYPTO 2.3.2R, including ancillary activities to issuing a qualifying stablecoin, it should consider whether SYSC 8 (Outsourcing) applies to that outsourcing arrangement.

Purpose

25/10/2027G

Where a firm carries on the activity of issuing a qualifying stablecoin, it may choose to appoint a third party to carry on one or more parts of that activity. This section sets out the rules that apply to such an appointment by a firm of a third party.

Appointing a third party: general requirements

25/10/2027R

If a firm appoints a third party in circumstances in which this chapter applies, it must comply with the following conditions:

  1. (1) the appointment of a third party must not result in the delegation by senior personnel of their responsibility;
  2. (2) the relationship and obligations of the firm towards the holders of a qualifying stablecoin under the regulatory system must not be altered;
  3. (3) the conditions with which the firm must comply in order to be authorised and to remain so must not be undermined; and
  4. (4) none of the other conditions subject to which the firm’s authorisation was granted must be removed or modified.
25/10/2027G

Where a firm appoints a third party in circumstances in which this chapter applies it remains fully responsible for discharging all of its obligations under the regulatory system.

25/10/2027G

Where a firm appoints a third party to carry on part of the activity of issuing a qualifying stablecoin, the firm will be carrying on, and responsible for, all parts of the activity of issuing a qualifying stablecoin.

25/10/2027G

Where a firm appoints a third party to carry on part of the activity of issuing a qualifying stablecoin, that appointment does not mean the third party will itself be issuing a qualifying stablecoin as it will not be carrying out all of the elements of that activity (as set out in article 9M of the Regulated Activities Order).

25/10/2027R

A firm must not appoint or retain a third party to carry on the activity of issuing a qualifying stablecoin on its behalf, or part of that activity, unless the following conditions are met:

  1. (1) the firm has taken reasonable steps to ensure that the third party has sufficient experience in, and is competent to carry on, the activity for which it is engaged;
  2. (2) the firm has assured itself that it can monitor and assess the quality of the service the third party is providing;
  3. (3) the third party will provide a service of an appropriate standard; and
  4. (4) any risks around the appointment of the third party are identified and adequately managed.
25/10/2027R

A firm must review its arrangements with third parties annually, including at least whether:

  1. (1) the third party continues to have sufficient experience in, and be competent to carry on, the activity for which it is engaged;
  2. (2) the firm is effectively monitoring the quality of the service that the third party is providing;
  3. (3) the third party is providing a service of an appropriate standard; and
  4. (4) any risks around the continued appointment of each third party are identified and adequately managed.
25/10/2027R
  1. (1) A firm must make a record of the grounds on which it satisfies itself as to the matters in:
    1. (a) CRYPTO 2.3.9R; and
    2. (b) on each review, CRYPTO 2.3.10R.
  2. (2) A record under (1) must include a record of the firm’s considerations and the conclusions it reached.
  3. (3) A record under (1) must be made on the date the selection is made or the review completed (as the case may be) and must be kept for either:
    1. (a) 5 years from that date; or
    2. (b) 5 years from the date the firm’s relationship with that third party ends (if later).
25/10/2027R

A firm must ensure that any money or assets it receives in exchange for a qualifying stablecoin in the process of carrying out the activity of issuing a qualifying stablecoin are received directly by the firm and not at any point received or held by a third party on the firm’s behalf.

25/10/2027G

A third party appointed by a firm to carry out part of the activity of issuing a qualifying stablecoin which involves offering or selling a qualifying stablecoin must not receive or hold money or assets on the firm’s behalf, and a firm is expected to structure its arrangements with that third party so that this is not necessary.

25/10/2027R

A firm must ensure that any third party acting on the firm’s behalf prominently displays on its website and any other public communication a statement that it acts on the firm’s behalf.

Appointing a third party: contractual requirements

25/10/2027R

Where a firm appoints a third party to carry out all or part of the activity of issuing a qualifying stablecoin, it must have in place a contract with that third party which meets all of the following conditions:

  1. (1) it is governed by UK law;
  2. (2) it enables the firm to request, and obliges the third party to provide to the firm, information that is sufficient to enable the firm to meet the rules to which it is subject in the regulatory system;
  3. (3) it enables the firm to request, and obliges the third party to provide to the firm, information for the purposes of enabling the firm to make an informed assessment of whether it is compliant with its obligations under the regulatory system; and
  4. (4) it includes provisions requiring the third party to:
    1. (a) promptly forward any complaint it receives relating to the activity of issuing a qualifying stablecoin to the firm;
    2. (b) provide appropriate information on the firm’s procedures for the handling of complaints on the third party’s website and in any other communications or medium through which the third party provides key information about the activity of the firm or features of the qualifying stablecoin product to holders; and
    3. (c) provide appropriate information on how the holder of a qualifying stablecoin may contact the firm, including making clear what role (if any) the third party plays in customer service on the third party’s website and in any other communications or medium through which the third party provides key information about the activity of the firm or features of the qualifying stablecoin product to holders.
25/10/2027R

Where a firm appoints a third party to act on its behalf in redeeming a qualifying stablecoin, it must have in place a contract with that third party which includes:

  1. (1) provisions setting out how the third party will handle, process, safeguard and segregate any qualifying stablecoins it receives in the course of the redemption process;
  2. (2) provisions requiring the third party to promptly provide to the firm:
    1. (a) information on the number of redemptions carried out by the third party on the firm’s behalf; and
    2. (b) information on the monetary values of redemptions carried out by the third party on the firm’s behalf;
  3. (3) provisions requiring the third party to provide information on expected redemption time frames to customers seeking redemption, and specifying the information to be provided;
  4. (4) provisions requiring the third party to redeem qualifying stablecoins in accordance with CRYPTO 2.4.14R, including in respect of timeframes;
  5. (5) provisions requiring the third party to:
    1. (a) immediately notify the firm in the event of exceptional circumstances which may require the suspension of redemption, as set out in CRYPTO 2.4.24R and CRYPTO 2.4.25G; and
    2. (b) where it makes such a notification, immediately provide the firm with all information and/or documentation available to it about those exceptional circumstances;
  6. (6) provisions prohibiting the third party from suspending its service of redemption unless either:
    1. (a) it has written agreement or instruction to do so from the firm; or
    2. (b) continuing with redemption would be contrary to a legal requirement to which the third party is subject;
  7. (7) provisions requiring the third party to make available to the firm the public address or addresses to which qualifying stablecoins that are the subject of a redemption request are to be sent by the holder; and
  8. (8) provisions requiring the third party to process redemptions in the order based on the fair and objective criteria the firm has determined under CRYPTO 2.4.21R.   
25/10/2027R

In the event that the firm receives a notification from a third party carrying out redemption on its behalf that there may be exceptional circumstances which require the suspension of redemption, it must consider whether the conditions in CRYPTO 2.4.24R are met.

Point In Time
25/10/2027