The Monetary Providers and the Treasury Bureau (FSTB), and the Hong Kong Financial Authority (HKMA) have collectively launched a public consultation paper outlining a legislative proposal to manage issuers of stablecoins. This transfer is prompted by the rising prominence of stablecoins inside the Web3 and digital asset (VA) ecosystems, coupled with the rising interconnection between conventional monetary techniques and VA markets.
The general public session interval for the proposed legislative measures commenced on December 27, 2023, and can run till February 29, 2024. All through this era, trade individuals and most of the people are inspired to offer feedback on the regulatory proposal.
The first goal of the proposed regulatory regime is to deal with potential financial and monetary stability dangers related to stablecoins whereas establishing applicable tips for the increasing digital asset panorama.
Key options of the proposed legislative framework embody the introduction of a brand new piece of laws to implement a licensing regime. Underneath this regime, all issuers of fiat-referenced stablecoins (FRS) assembly particular circumstances can be required to acquire a license from the Financial Authority (MA).
The session paper outlines that solely specified licensed entities can be permitted to supply FRS, and such stablecoins licensed by the MA may be supplied to retail buyers. The proposal additional restricts the promoting of FRS issuance by unlicensed entities or non-specified licensed entities providing FRS.
The regulatory framework equips authorities with the mandatory powers to regulate stablecoin parameters and actions in response to the speedy evolution of the digital asset market. Moreover, it introduces a transitional association to facilitate the graceful implementation of the regulatory regime.
The Secretary for Monetary Providers and the Treasury, Mr Christopher Hui, mentioned,
“With the implementation of the licensing regime for VA buying and selling platforms from June this 12 months, the legislative proposal to manage FRS is one other essential measure facilitating Web3 ecosystem improvement in Hong Kong.”
Hong Kong’sKong’s HKMA Proposes Stablecoin Regulation, Launches Sandbox Initiative
The Hong Kong Financial Authority (HKMA) has put forth a proposal for regulating stablecoins and concurrently launched a sandbox association to convey supervisory expectations and compliance steering. The sandbox initiative goals to solicit suggestions on the proposed regulatory necessities and supply an area for entities curious about issuing stablecoins in Hong Kong to check their operations inside a managed surroundings.
This regulatory improvement is a part of Hong Kong’s broader efforts to ascertain a complete framework for digital property and stablecoins. In 2023, Hong Kong took important steps in crypto regulation, distinguishing itself with a extra proactive method in comparison with many Western counterparts. The HKMA carried out a licensing regime for digital asset buying and selling platforms earlier within the 12 months, making certain strict compliance with Anti-Cash Laundering rules.
The discussions on stablecoin rules in Hong Kong started in January 2022, involving the presentation of policy-related questions and outlining potential regulatory outcomes, together with situations starting from no motion to a blanket ban.
In October, Hong Kong regulators introduced restrictions on the buying and selling of sure stablecoins, together with Tether and USD Coin, for retail buyers on account of related dangers. They emphasised that retail buying and selling of stablecoins wouldn’t be permitted till they have been formally regulated.
The HKMA’s proposal for stablecoin regulation aligns with the jurisdiction’s dedication to fostering a regulated and safe surroundings for digital property. The sandbox initiative affords a collaborative house for trade individuals to offer suggestions and have interaction with regulators, contributing to the formulation of efficient and balanced regulatory measures.