Markets News Report
December 27, 2023

Hong Kong Initiates Public Consultation, Proposes Licences for Stablecoin Issuers

In Brief

Hong Kong’s FSTB and HKMA issued consultation document to gather opinions on legislative proposals for the supervision of stablecoin issuers.

Hong Kong Initiates Public Consultation, Proposes Licences for Stablecoin Issuers

Financial Services and the Treasury Bureau of Hong Kong (FSTB) and the Hong Kong Monetary Authority (HKMA) jointly issued a public consultation document to collect opinions on legislative proposals for the supervision of stablecoin issuers.

The Hong Kong government believes that establishing a regulatory system for issuers of fiat currency stablecoins is necessary. Regulating fiat stablecoin issuers through a risk-based and flexible approach can manage potential monetary and financial stability risks and provide transparency and appropriate regulations.

The new legislative proposals consider the market and public views collected by the HKMA in the “Discussion Paper on Crypto-Assets and Stablecoins” published last year and include implementation of a licensing system through the introduction of new legislation, which mandates eligible fiat stablecoin issuers to obtain a license from the HKMA

The proposals specify that only stablecoins issued by licensed issuers could be offered to retail investors. This focused approach enhances regulatory control and safeguards the interests of investors. The promotion of fiat currency stablecoins by non-licensed issuers and as well as purchase of services related to these stablecoins from non-designated licensed institutions is prohibited to maintain a regulated environment and reduce potential risks associated with unlicensed entities.

Authorities are granted with the necessary powers to adjust the scope of regulated stablecoins and associated activities. This flexibility aims to ensure that regulatory measures remain effective and responsive to rapid changes in the evolving landscape of virtual assets.

The legislative proposals introduce transitional arrangements designed to facilitate the smooth implementation of the regulatory system. These arrangements are crucial in minimizing disruptions and ensuring a seamless transition for stakeholders affected by the new regulatory framework.

The authorities will seek public feedback on the legislative proposal until February 29, 2024.

In addition to the proposal, HKMA announced its intention to establish a “sandbox” arrangement to communicate regulatory expectations and provide compliance guidance to issuers with specific plans to issue fiat-currency stablecoins in Hong Kong.

Hong Kong’s Clear Regulatory Landscape Allows Innovation

Hong Kong has positioned itself as a favorable regulatory environment for cryptocurrencies, showcasing the government’s proactive stance in fostering innovation within the financial sector. This commitment is evident through ongoing efforts to update regulations and welcome an increasing number of cryptocurrency-related firms to the region. 

Earlier this year, Hong Kong officially initiated its crypto licensing regime for virtual asset trading platforms, enabling licensed exchanges to provide retail trading services. OSL and HashKey Exchange became the first exchanges to offer retail crypto services in the city.

Last week, the Hong Kong SFC and HKMA jointly published a circular, outlining their intentions to accept applications for the authorization of cryptocurrency exchange-traded funds (ETFs) and virtual asset spot exchange-traded funds (VA spot ETFs), signalling the government’s progressive stance toward digital assets.

In navigating the evolving landscape of virtual assets, Hong Kong’s commitment to a clear regulatory framework not only fosters innovation but also sets the stage for a dynamic and secure financial ecosystem.

Disclaimer

In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.

About The Author

Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.

More articles
Alisa Davidson
Alisa Davidson

Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.

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