As digital finance continues to evolve, this Model Law chiselled by the Commonwealth Secretariat stands as a testament to what international cooperation can achieve: a shared foundation for secure, transparent, and inclusive financial systems that serve people first. It was drafted by Maxine L. Binns, Susan Jarvis, and Loretta Joseph, with input from a distinguished group of legal practitioners, regulators, and technical experts from across the Commonwealth and beyond. This breadth of expertise gives the framework both rigour and practicality, while aligning it with international best practice.

The global financial landscape is undergoing a profound transformation. At the heart of this shift is the rapid emergence of digital assets, with stablecoins standing out as one of the most consequential innovations. Designed to maintain a stable value by being pegged to fiat currencies or other reference assets, stablecoins are increasingly being adopted for payments, remittances, and broader financial inclusion. Recognising both the opportunities and risks this evolution presents, the Commonwealth Secretariat has introduced the Commonwealth Model Law on Stablecoins – a comprehensive, adaptable legal framework intended to support member states in regulating stablecoins effectively.

Building on the earlier Commonwealth Model Law on Virtual Assets, this new instrument offers a practical roadmap for jurisdictions seeking to harness the benefits of digital finance while safeguarding financial stability, protecting consumers, and combating financial crime.

Why a Model Law on Stablecoins?

For many Commonwealth nations – particularly developing and emerging economies – stablecoins represent a powerful opportunity to widen financial inclusion, reduce transaction costs, and integrate citizens and businesses into the global economy. However, the same characteristics that make stablecoins attractive also create new risks: monetary instability, fraud, money laundering, and threats to consumer protection.

As the Secretary-General of the Commonwealth, the Hon. Shirley Botchwey, notes in the foreword, the Model Law is designed to ensure that “innovation serves people – expanding opportunity while ensuring stability and safeguarding trust.” It is explicitly not a one-size-fits-all solution but a shared resource that countries can adapt to their own legal systems, policy priorities, and stages of development.

Structure and Key Provisions

The Model Law is organised into ten parts, covering the full spectrum of stablecoin regulation.

• Part I–II: Foundations and Scope

The Act begins by defining stablecoins and establishing the objectives of the regulatory authority. It clarifies the scope of regulated stablecoin issuance and related activities, ensuring legal certainty for issuers, regulators, and consumers alike. Crucially, it identifies who may – and may not – issue stablecoins, setting the foundation for trust in the market.

• Part III: Licensing and Authorisation

A distinctive feature of the Model Law is its tiered licensing framework. Recognising that not all stablecoin issuers pose the same level of risk, the Act provides for differentiated regulatory classifications based on factors such as issuance size, user base, and systemic importance. The framework includes:

• Licensing requirements for stablecoin issuers

• Tiered classification with proportionate oversight

• Mechanisms for inter-tier transition and reclassification

• “Fit and proper” requirements for issuers and key personnel

This proportional approach ensures regulatory burdens align with risk profiles, encouraging innovation among smaller issuers while imposing stricter requirements on systemically important ones.

• Part IV: Reserve Management and Transparency

Perhaps the most critical section addresses reserve management – the cornerstone of stablecoin credibility. The Model Law requires issuers to:

• Maintain adequate reserves backing every stablecoin issued

• Hold reserves only in permitted, low-risk assets

• Segregate and safeguard customer reserves

• Conduct independent audits and submit regular regulatory reports

• Provide public disclosures and governance transparency

A phased reserve model and tiered reserve requirements ensure flexibility while maintaining strong consumer protections.

• Part V–VI: Financial Crime and Consumer Protection

The Model Law incorporates robust anti-money laundering and counter-terrorism financing obligations, aligning with international standards set by global bodies such as the Financial Action Task Force.

It also enshrines clear consumer protections, including rights for stablecoin users, fraud prevention measures, and accessible redress mechanisms. These provisions reflect a balanced approach that prioritises user trust without stifling market growth.

• Part VII–VIII: Supervision, Enforcement, and Cross-Border Cooperation

Recognising the inherently borderless nature of digital assets, the Model Law includes provisions for crossborder recognition, equivalence, and information-sharing between regulators. Strong enforcement mechanisms – including offences, sanctions, and judicial powers – ensure compliance and deter misconduct.

• Part IX: Technology and Cybersecurity

In a notable advance for digital finance regulation, the Model Law devotes an entire section to information and communication technology resilience. It addresses:

• Access controls and multi-party authorisation

• Key management and wallet security

• Smart contract and oracle security

• Secure coding practices

• Incident response and governance

These provisions reflect the technical realities of operating stablecoin systems and provide regulators with the tools needed to address emerging cyber risks.

• Part X: Transitional and Final Provisions

The Act provides for phased compliance, appeal mechanisms, regulatory guidelines, and customer communications – ensuring that the transition to a regulated stablecoin environment is orderly and predictable.

Innovation in Service of People

The Commonwealth Model Law on Stablecoins represents a significant step in modernising global financial regulation. By offering a flexible, technology-neutral, and adaptable framework, it empowers Commonwealth nations to embrace digital finance with confidence – capturing its benefits for financial inclusion and economic growth while managing its risks responsibly.