Coinspeaker
Hong Kong Completes Public Consultation to Implement Stablecoin Rules
Hong Kong has finally completed its public consultation on stablecoin regulations within the country. On July 17, the Financial Services and the Treasury Bureau (FSTB), along with the Hong Kong Monetary Authority (HKMA), released the results of the two-month-long consultation, with respondents supporting the proposed regulation.
During the consultation period, which ended in February, the authorities received 108 responses from various market participants, industry associations, businesses, professional organizations, and other stakeholders.
The majority of these respondents agreed on the need for a regulatory regime for stablecoins. They acknowledged that with the rise of virtual assets, it is crucial to manage potential financial risks and ensure transparency in the market.
Broad Support and Suggestions
According to the announcement, the proposed regulations and implementation plans received broad support from the respondents. Some participants, however, suggested further enhancements to the proposal to provide clear guidelines and protections to manage the risks associated with stablecoins.
Hong Kong introduced the proposed stablecoin regime in December 2023 after the successful implementation of its new licensing regime for crypto exchanges and other digital asset service providers in June.
The proposed regime aims to address concerns related to monetary policy, financial stability, and investor protection. At the same time, it encourages the responsible development of the virtual asset market in Hong Kong.
Under the legislation, stablecoin issuers in Hong Kong must comply with comprehensive licensing conditions and requirements concerning the digital assets. This will ensure that the value of reserves is equal to the par value of stablecoins in circulation at all times. Additionally, the reserve assets must be highly liquid, with minimal market, credit, and concentration risk, and be held in the fiat currency referenced by the stablecoin.
Next Steps
Both the FSTB and HKMA will consider the feedback and suggestions from the public consultation to finalize the legislative proposal. According to the announcement, the authorities aim to introduce a bill to the Legislative Council as soon as possible.
Commenting on the successful completion of the consultation, FSTB Secretary Christopher Hui said the stablecoin regime will further enhance the existing crypto regulatory framework for exchanges.
“In addition to the existing regulatory regime for VA trading platforms, the establishment of a licensing regime for FRS issuers will further strengthen the VA regulatory framework in Hong Kong in line with international standards and effectively mitigate possible financial stability risks associated with FRS issuance activities.”
A Stablecoin Sandbox
The stablecoin regime is expected to enhance Hong Kong’s position as a leading financial hub by ensuring that stablecoins are used safely and responsibly, aligning with international regulatory standards.
In March this year, the country launched a stablecoin sandbox designed to serve as an official communication channel for the HKMA and the industry to exchange views on the proposed regulatory regime.
The sandbox will also facilitate the formulation of fit-for-purpose and risk-based regulatory requirements, which is key to promoting the sustainable and responsible development of the stablecoin issuance business.
Hong Kong Completes Public Consultation to Implement Stablecoin Rules
