Regulation
Hong Kong Eyes Stablecoin Licensing Regime to Bolster Cryptocurrency Stability
Hong Kong’s financial regulators said they have concluded a consultation period on a fiat currency licensing program initiative stable currency (FRS) suppliers.
The consultation, which closed in February, received 108 contributions from various stakeholders, including market operators, industry associations and professional organisations.
The Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) announced this development in a joint communication declaration July 17th.
Licensing regime for stablecoins
Regulators said that most respondents agreed that a regulatory regime for FRS issuers was necessary, given the rapid rise of drastic digital activities in recent years. They believe this will manage potential risks to monetary and financial stability and ensure transparent and adequate safeguards.
Furthermore, most of the respondents also supported the proposed regulatory requirements and implementing provisions requested by these stablecoin issuers. Regulators he wrote:
“Compared to other types of stablecoins (e.g. commodity- or precious metal-backed stablecoins), FRS is considered to have greater potential to be developed as a commonly acceptable means of payment and therefore poses higher and more imminent risks to monetary and financial stability.”
Christopher Hui, Secretary of the FSTB, noted that the licensing regime would strengthen Hong Kong’s digital asset regulatory framework. He also stressed that it is in line with international standards, promotes financial stability and mitigates losses.
Financial regulators said they will take all feedback into consideration in finalising the legislative proposal for the regulatory regime and intend to submit a draft bill to the Legislative Council soon.
This announcement follows the launch in Hong Kong Stablecoin regulation sandbox program in March. HKMA is currently processing applications for the sandbox and the list of participants will be announced shortly.
Meanwhile, these efforts reflect Hong Kong’s demand to become a crypto innovation hubHong Kong remains one of the few regions focused on regulate the cryptocurrency sectormaking it a favorable destination for operators in the sector.