Stablecoin issuance in the Gelephu Mindfulness City is not a grey area. The Gelephu Mindfulness City Special Administrative Region (GMC) names "Issuing a Fiat-Referenced Token" as a Regulated Activity in its primary statute, the Financial Services Act 2025, and the same Act says which token designs are prohibited outright. Basnet Law advises issuers on the licence, the token design the Act permits, and the adjacent permissions a distribution model may need. This page explains the definition, the prohibitions and how a licence application runs.
Our legal advisory
- Confirm that the proposed token meets the statutory definition of a Fiat-Referenced Token, including the single-currency reference and on-demand redemption features.
- Screen the design against the Act's prohibition on algorithmic stablecoins and privacy tokens.
- Scope adjacent permissions: Providing Money Services for payment rails, Dealing as Principal for primary issuance and redemption desks, and Providing Custody for reserve or client wallets.
- Apply the Connected Services exclusion and the payment-services carve-outs so the permission set is no wider than the law requires.
- Draft the reserve, redemption, disclosure and governance framework GFSO will examine under the GEN Rulebook 2026 and the Virtual Asset Guidance.
- Advise on the application, Approved Person filings and the In-Principle Approval conditions.
- Advise on the Accepted Fiat-Referenced Token determination.
How GMC stablecoin licensing works, in plain terms
A Fiat-Referenced Token is defined in the Financial Services Act 2025 as a digital asset transferred and stored using distributed ledger or similar technology, whose purpose is "to be used as a medium of exchange with a stable store of value", by referencing a fixed amount of a single fiat currency and enabling the holder to redeem the token from its issuer for that amount on demand. Issuing such a token is a specified kind of activity, so doing it by way of business in GMC requires a Financial Services Licence from the Gelephu Financial Services Office (GFSO) under the Act's General Prohibition.
The Act empowers GFSO to prescribe the requirements for Licensed Firms conducting Regulated Activities in relation to Fiat-Referenced Tokens, and the factors for a token to be an Accepted Fiat-Referenced Token. GFSO can exclude or add requirements for a particular firm by written notice. One prohibition is absolute: no person may carry on a Regulated Activity involving a Fiat-Referenced Token that is an algorithmic stablecoin, a privacy token, or a digital asset employing similar technology. GFSO may also direct that a specific token not be issued, sold or held for a period.
The boundary with payments is drawn in the Act. Providing currency exchange, money remittance or payment services is a separate Regulated Activity. A payment transaction executed by transferring a Fiat-Referenced Token directly between payer and payee, without intermediary intervention, is not a Payment Service, and neither is the issuance of the token itself. A Licensed Firm does not Provide Money Services where those services are a necessary part of another Regulated Activity it carries on. Reserve composition, capital and fees are set by GFSO and the rulebooks; we confirm the current requirements at engagement.
Who this is for
- Fintechs and payment companies issuing a USD-referenced or other single-currency token.
- Exchanges and custodians that want an in-house settlement token.
- Treasury and remittance businesses building on tokenised fiat.
- Foreign issuers seeking a regulated GMC entity for an international product.
How a legal advisory engagement runs
- Token design review against the statutory definition and the prohibition on algorithmic and privacy designs.
- Permission map: the issuing permission plus any of dealing, custody and money services, after applying the exclusions and carve-outs, so you apply for exactly what you need.
- Advice on reserve, redemption, whitepaper and governance documentation.
- Advice on the GFSO meeting, application, interviews and In-Principle Approval.
- Advice on incorporation, capital, banking and reserve arrangements, then licence issue.
Frequently asked questions
What counts as a Fiat-Referenced Token?
A DLT-based digital asset used as a medium of exchange with a stable value, referencing a fixed amount of one fiat currency and redeemable on demand from the issuer for that amount. Multi-currency baskets and non-redeemable designs fall outside the definition and need separate analysis, which we do before the application is drafted.
Are algorithmic stablecoins allowed?
No. The Financial Services Act 2025 prohibits any Regulated Activity involving an algorithmic stablecoin, a privacy token or similar technology.
Do I also need a payment services licence?
Not for issuance alone: the Act says that issuing a Fiat-Referenced Token is not a Payment Service. If you also operate payment accounts or remittance, the money services permission is engaged unless the Connected Services exclusion applies.
Can a foreign issuer distribute a token in GMC without a licence?
The General Prohibition applies to activity carried on by way of business in GMC. The exclusions for non-GMC persons are narrow and fact-specific; we assess them before any GMC marketing.
What will GFSO test in the application?
Adequate financial and non-financial resources, fitness and propriety, capacity to be supervised and compliance arrangements under the GEN Rulebook 2026, with the Virtual Asset Guidance overlay. We build the application around those four heads.
Contact
Basnet Law Pte. Ltd. is the first law firm incorporated in the Gelephu Mindfulness City.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
