IFSCA directions for bullion intermediaries

The International Financial Services Centre Authority (IFSCA) has recently issued a circular, dated May 01, 2024, directed towards Bullion MIIs, Bullion Intermediaries, and Vault Managers in the International Financial Services Centre (IFSC), along with all market participants on the Bullion Exchange. The circular introduces a significant development in the form of allowing eligible units set up in the IFSC to supply bullion on the India International Bullion Exchange (IIBX) as Qualified Suppliers (QS-IFSC).

This move, detailed in the circular, aims to broaden the participation scope of IFSC entities and expand the pool of suppliers on the IIBX. Under this decision, entities registered with the IFSCA as bullion market intermediaries are automatically eligible to become Qualified Suppliers. However, other entities need to obtain a No Objection from the IFSCA.

The circular outlines the conditions and procedures for IFSC entities to become Qualified Suppliers. These include compliance with regulations, guidelines, and circulars issued by the IFSCA, sourcing bullion from accredited refiners or entities associated with recognized associations/exchanges/jurisdictions, and adherence to OECD Due Diligence Guidance for Responsible Supply Chain.

Furthermore, QS-IFSC are required to participate on IIBX only as clients through a Bullion Trading Member and must bring their bullion into empaneled Vaults operated by IFSCA registered Vault Managers. The bullion supplied by QS-IFSC must adhere to the good delivery standards prescribed by IIBX for the creation of Bullion Depository Receipts (BDRs).

To ensure compliance, the circular mandates that the International Bullion Exchange Limited (IIDIL) will prescribe Standard Operating Procedures (SOP) for verifying the adherence of QS-IFSC to the stated conditions. Additional documentation and clarifications may be requested from QS-IFSC by IIDIL or IIBX as necessary.

This significant decision by the IFSCA, empowered by the International Financial Services Centres Authority Act, 2019, unlocks new opportunities for IFSC entities in the bullion market. By allowing IFSC entities to participate as Qualified Suppliers on the IIBX, the circular facilitates greater involvement in the bullion trade, fostering growth and development within the IFSC ecosystem.

This move not only enhances the attractiveness of the IFSC as a global financial hub but also strengthens the bullion market infrastructure within the IFSC. It aligns with the IFSCA’s objective of promoting ease of doing business, fostering innovation, and ensuring regulatory compliance within the IFSC jurisdiction.