The Hong Kong Monetary Authority (HKMA) has concluded its consultation on stablecoin regulation, proposing a new licensing regime for stablecoin issuers.
The move aims to enhance regulatory oversight and ensure the stability and security of stablecoins in Hong Kong.
Issuers of fiat-referenced stablecoins will be required to obtain a license from the HKMA, with specific requirements on reserve assets and monthly attestations.
The proposal reflects Hong Kong’s commitment to becoming a leading hub for regulated digital assets and virtual assets.
Stablecoin Regulation in Hong Kong
The Financial Services Department, the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) have jointly released the consultation conclusions on the legislative proposal to implement a regulatory regime for stablecoin issuers. This move comes as part of Hong Kong’s efforts to establish itself as a leading hub for regulated digital assets and virtual assets. The proposed legislation follows an earlier round of consultation on cryptoassets and stablecoins by the HKMA, which concluded in January 2023.
Today, the HKMA and the Financial Services & the Treasury Bureau jointly released the consultation conclusions on the legislative proposal to implement the regulatory regime for #stablecoin issuers in #HongKong, after receiving over 100 submissions from industry stakeholders. pic.twitter.com/mXNijvTEW7
— HKMA 香港金融管理局 (@hkmagovhk) July 17, 2024
Key Proposals in the New Licensing Regime
Under the proposed regime, issuers of stablecoins that track fiat currencies in Hong Kong will need to obtain a license from the HKMA. To ensure stablecoins are fully backed, issuers will also need to publish monthly attestations on reserve assets conducted by a third-party auditor. The HKMA also plans to introduce a sandbox arrangement for communicating supervisory expectations and guidance on compliance to entities having a genuine interest in, and a reasonable plan on, issuing stablecoins in Hong Kong.
Industry Reactions and Implications
The proposed legislation has received broad support from industry stakeholders, with many entities preparing to apply for the Hong Kong stablecoin license once the regulatory framework is in place. The stablecoin sandbox launched by Hong Kong in March has been a crucial step toward understanding and shaping future regulations for the industry. The upcoming release of the consultation results marks an important step for Hong Kong in establishing rules for stablecoins.
The proposed legislation by the FSTB and the HKMA underscores Hong Kong’s ambition to become a leading hub for regulated digital assets. By setting clear rules for stablecoin issuers, Hong Kong aims to enhance the trustworthiness and reliability of its financial market. Feedback from industry stakeholders during the consultation will provide valuable insights to shape the final legislative proposal to be submitted to the Legislative Council.
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