12-1.2. Safe custody of Qualified Investment Tokens

A Trading Facility Operator must ensure that:

(1) Where its safe custody arrangements involve acting as a Digital wallet Service Provider, it complies with the following requirements for Authorised Firms Providing Custody for Qualified Investment Tokens:

(a)   a Digital wallet Service Provider must ensure that:

(i)     any DLT application it uses in Providing Custody for Qualified Investment Tokens is resilient, reliable and compatible with any relevant facility on which those Qualified Investment Tokens are traded or cleared;

(ii)    it has the ability to clearly identify and segregate Qualified Investment Tokens belonging to different Clients; and

(iii)  it has in place appropriate procedures to enable it to confirm Client instructions and transactions, maintain appropriate records and data relating to those instructions and transactions and to conduct a reconciliation of those transactions at appropriate intervals.

(b)   a Digital wallet Service Provider, in developing and using DLT applications and other technology to provide custody of Qualified Investment Tokens, must ensure that:

(i)     the architecture of any Digital wallet used adequately addresses compatibility issues and associated risks;

(ii)    the technology used and its associated procedures have adequate security measures (including cyber security) to enable the safe storage and transmission of data relating to the Qualified Investment Tokens;

(iii)  the security and integrity of cryptographic keys are maintained through the use of that technology, taking into account the password protection and methods of encryption used;

(iv)  there are adequate measures to address any risks specific to the methods of usage and storage of cryptographic keys (or their equivalent) available under the DLT application used; and

(v)   the technology is compatible with the procedures and protocols built into the operating rules or equivalent on any facility on which the Qualified Investment Tokens are traded or cleared or both traded and cleared.

 

(2) Where it appoints a Third Party Digital wallet Service Provider to provide custody for Qualified Investment Tokens traded or cleared on its facility, that Person is either:

(a) an Authorised Firm permitted to be a Digital wallet Service Provider; or

(b) a firm that is regulated by a Financial Services Regulator to an equivalent level as that provided for under the AFSA regime for Digital wallet Service Providers.