| 1. | VASPs Licensed to issue ARVAs which purport to maintain a stable value in respect of any Referenced Asset, shall hold and maintain sufficient and acceptable Reserve Assets such that—
| a. | the risks associated with the rights and/or to the value that the ARVA grants, or purports to grant, owners of the ARVA are secured; and | | b. | the liquidity risks associated with any rights of redemption granted to the owners and/or holders are mitigated and managed.
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| 2. | VASPs Licensed to issue ARVAs shall, at all times, manage Reserve Assets effectively and prudently, at least by—
| a. | maintaining Reserve Assets only with custodians or other Entities which are validly licensed and qualified to hold such assets; | | b. | ensuring Reserve Assets are segregated from the VASP’s own funds; | | c. | ensuring newly added Reserve Assets are held in custody in accordance with Rule III.C.2.a by no later than the time period stipulated by VARA as a condition of its approval of the VASP to issue the ARVA; | | d. | having in place policies and procedures to ensure Reserve Assets can be promptly accessed to process and complete any redemption requests in accordance with Rule III.E, including but not limited to conversion into AED where the redemptions are being paid in AED; and | | e. | conducting regular risk assessments to evaluate the appropriateness of the composition of Reserve Assets in ensuring compliance with this Rule III.C .
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| 3. | VASPs Licensed to issue ARVAs shall, to the furthest extent permitted by applicable laws, ensure that Reserve Assets—
| a. | are legally segregated from its estate and the Reserve Assets of any other Virtual Assets; | | b. | are not rehypothecated, or subject to any pledges or encumbrances which would prevent the Issuer from processing any redemption request in accordance with Rule III.E; and | | c. | will not otherwise be subject to any recourse by the creditors of the VASP, the custodian of the Reserve Assets or any other third parties, in particular, in the event of any party becoming Insolvent.
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| 4. | Legal opinion. VASPs Licensed to issue ARVAs shall be required to provide VARA with a legal opinion, provided by a duly registered practising lawyer, confirming compliance with Rule III.C.3 above. |
| 5. | Conflicts of interest. VASPs Licensed to issue ARVAs shall take all appropriate steps to prevent, identify, manage and publicly disclose conflicts of interest arising from the constitution and management of Reserve Assets.
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