Hong Kong Launches Public Engagement, Suggests Licensing for Stablecoin Providers

The Financial Services and the Treasury Bureau of Hong Kong ( FSTB ) and the Hong Kong Monetary Authority ( HKMA ) have collaboratively issued a public consultation document seeking input on legislative initiatives meant to regulate stablecoin issuers.

The Hong Kong government asserts that creating a regulatory framework for stablecoin issuers is essential. Implementing a risk-aware and adaptable approach towards the regulation of fiat stablecoin issuers is crucial to mitigate possible monetary and financial stability challenges while ensuring transparency and suitable regulations. fiat currency stablecoins The new legislative proposals are informed by market feedback and public insights collected by the HKMA in last year’s ‘Discussion Paper on Crypto-Assets and Stablecoins’. They call for the establishment of a licensing framework through fresh legislation that would require qualifying fiat stablecoin issuers to obtain a license from the authorities.

According to the proposals, only stablecoins from licensed issuers are permitted for sale to retail investors. This targeted strategy heightens regulatory oversight and protects the interests of investors. Promotion of fiat currency by unlicensed issuers, as well as acquiring services tied to these stablecoins from entities that do not hold the necessary licenses, is banned to uphold a regulated marketplace and diminish risks linked to unregulated actors. HKMA . 

Regulators are empowered with the authorities to modify the scope of regulated stablecoins and their related activities. This level of flexibility is designed to ensure that the regulatory framework remains effective and can adapt swiftly to the fast-evolving world of digital assets. stablecoins The new legislative framework includes transitional provisions aimed at ensuring a seamless rollout of the regulatory structure. Such arrangements are vital to minimize disruptions, providing a smooth transition for all stakeholders impacted by these changes.

The public is invited to provide feedback on these legislative proposals until February 29, 2024.

In addition to these proposals, the HKMA has expressed its intention to implement a ‘

’ system designed to communicate regulatory expectations and offer compliance guidance to issuers planning to introduce fiat-currency stablecoins in Hong Kong.

Hong Kong’s Robust Regulatory Framework Encourages Innovation sandbox Hong Kong is establishing itself as a favorable hub for cryptocurrency regulation, reflecting the government's dedication to nurturing innovation within the financial services sector. This commitment is highlighted by ongoing efforts to refresh regulations and attract a growing number of cryptocurrency-related enterprises to the region.

Earlier this year, Hong Kong officially embarked on its licensing process for virtual asset trading platforms, allowing licensed exchanges to offer trading services to retail customers.

became the pioneer exchanges in providing retail crypto services throughout the city.

Last week, the Hong Kong SFC and HKMA issued a joint circular, outlining their plans OSL and HashKey Exchange for the approval of cryptocurrency exchange-traded funds (ETFs) and virtual asset spot ETFs, which indicates the government’s open-minded approach towards digital assets.

As Hong Kong maneuvers through the changing terrain of digital assets, its dedication to a transparent regulatory environment not only promotes innovation but also lays the groundwork for a lively and secure financial ecosystem. to accept applications Discussion Paper on Crypto-Assets and Stablecoins

Financial Services and the Treasury Bureau