At MDB Law, we have developed the #Stablecoinstack, our proprietary solution to guide new and existing stablecoin issuers through every stage of deployment journey. Whether you are minting locally, offshore or hybrid, managing full or partial reserves locally or internationally, building remittance, retail or trade finance use cases, our #Stablecoinstack will measure all aspects of your issuance model(s), custody arrangements, redemption policies, liquidity stress-testing, legal risks, compliance risks and consumer protection policies.
Below is a short extract from our #Stablecoinstack© to demonstrate a typical customer journey:
(1) TRANSACTION FLOW & MODEL VIABILITY
After NDAs and Confidentialy Covenants have been signed, we begin the engagement with a preliminary transaction flow assessment to gauge your proposed stablecoin model. This early-stage work allows us to:
- Provide guidance to client regarding: (i) Issuance of tokens backed by fiat reserves, (ii) Minting mechanics and reserve verification (iii) Redemption flows from fiat to ZAR (iv) staking (v) internal treasury management of fiat liquidity.
- Draft and provide ongoing guidance to Client regarding Business Plan for stablecoin issuance services including cross-referencing BP with the Business Continuity Plan, Risk Management and Compliance Program (RMCP), Corporate Governance Framework, User Terms and Conditions, Liquidity Policies and operational compliance protocols.
- Guidance on all other components of the Business Plan required for FSCA licensing and approval.
- Advice on flow charts (user transaction, AML/KYC solutions, customer support, treasury activities).
- Incorporate stablecoin design features and issuance infrastructure/ operational mechanics.
- Revenue pricing model: interest earned on reserves, fees etc.
- Marketing Plan and customer profile: target users (retail, SME, diaspora).
- Develop specific use cases in African market.
We continue to work closely with clients during the testing and refinement of the issuance model which may include building hybrid or multi-jurisdictional models. Our support extends to onshore/offshore holding strategies, reserve design, liquidity stress-testing and proactive regulator engagement to clarify the treatment of offshore-issued stablecoin reserves.
(2) LICENSING & REGULATORY COMPLIANCE
In South Africa, stablecoin issuance alone does not trigger licensing under the FAIS Act. However, certain linked activities (wallet custody, private key management, onboarding, price indicators or on/off-ramping) may fall within FSCA’s 2022 Declaration of Crypto Assets as a Financial Product. At this juncture, our team will assess your issuance and operational models, including:
- Draft and provide guidance to Client regarding Risk Management and Compliance Programme (“RMCP”) including Central Client List, Onboarding Questionnaire, Risk Rating sheets, Employee Risk Matrix, Reporting Forms aligned with FIC Act requirements and FSCA expectations.
- Further develop Use cases and risks specific to stablecoin flows, redemption surges and liquidity mismatches.
- Alignment with Business Continuity Plan and escalation matrix for compliance breaches or system failures.
- Enhanced integrity rules to prevent illicit use of stablecoins, including automated sanctions screening and escalation protocols.
- Mapping of risk triggers to operational workflows (onboarding, wallet funding, redemption, cross-border disbursement).
- Integration with AML/CFT controls, including source of funds verification, purpose code declarations and suspicious transaction reporting.
- Treasury management and reserve oversight.
- Coin features, wallet architecture and client onboarding flows.
Where applicable, MDB Law will guide clients through the process of securing the appropriate Financial Services Provider (FSP) licensing (Category I or II), ensuring obligations are scoped accurately and compliance documents reflect the correct licensing position.
(3) FX & EXCHANGE CONTROL STRATEGY
Stablecoin projects intersect with cross-border payments and exchange control frameworks. MDB Law helps clients:
- Evaluate treasury and reserve strategies (custody and redemption) for alignment with SARB rules and new directives.
- Test cross-border flows against ADLA Manual and remittance categories.
- Clarify whether blockchain-based cross-border payment use cases fall outside conventional forex classifications.
- Prepare regulator-facing arguments that distinguish stablecoin flows from foreign exchange remittances.
- Assess integration with OTC desks and crypto exchanges, ensuring that off-chain liquidity and redemption processes are tested for compliance.
(4) OPERATIONAL RISK AND COMPLIANCE
Every stablecoin model must align with AML/CTF requirements and maintain transparent flows of funds. We assist in mitigating risks across:
- Vertical Integration & Conflicts of Interest: Safeguards for issuers who also act as custodians, exchanges, or wallet providers. Includes governance segregation, independent audits and external dispute mechanisms.
- Future Regulatory Triggers: Anticipating enhanced oversight of algorithmic, multi-currency or basket-backed models.
- Liquidity Risk Management: Preparing issuers for potential mandates on reserve ratios, stress testing, redemption guarantees and reserve disclosure.
- Bank Reserve Holdings: Structuring relationships with commercial banks that may face prudential review and supervisory capital adequacy conditions.
(5) STABLECOIN ISSUANCE ENTITY
Stablecoin issuers often incorporate Special Purpose Vehicle (SPV) companies for custody of the reserves and a holding company to manage business interests. As commercial legal counsel we also advise on:
- Incorporation of a issuance entity aligned to FSCA / SARB licensing, operational and governance requirements; alternatively
- Review of Client’s acquired issuance entity including due diligence of business model, fit and proper staff, governance frameworks for FSCA approval.
- Issuer Jurisdiction: Analysis of offshore CNHS minting implications for regulatory reporting (if applicable)
- Beneficial ownership reporting;
- Special Purpose Vehicle (SPV) companies;
- Legal and tax implications of offshore holdings;
- Withholding tax and repatriation strategies;
(6) LIQUIDITY RISK MANAGEMENT
As regulators sharpen their focus on systemic safeguards for digital assets, liquidity is emerging as a primary lens through which stablecoin resilience will be assessed. We provide guidance and policies regarding liquidity risk management, reserve structuring and stress testing methodologies for stablecoin operations:
- Stablecoin Reserve Management: protocols to support stablecoin issuance and redemption, including asset composition, valuation frequency and redemption coverage ratios.
- Liquidity Risk Controls: Development of liquidity policy and stress-testing methodologies to assess resilience under redemption surges, FX volatility and market shocks.
- Capitalization and Dissolution Planning: Drafting of dissolution policy in insolvency scenarios. Clarify token holder rights, reserve access and audit trail requirements.
- Guidance on how to position voluntary safeguards (e.g., reserve attestations, redemption SLAs) for regulator and consumer trust.
Whether you are building a new stablecoin issuance platform, exploring hybrid reserve structures, or stress-testing cross-border payment use cases, MDB Law is ready to become your legal and compliance partner in stablecoin innovation.
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