Summary
The Hong Kong Monetary Authority (HKMA) has begun a consultation period on a new regulatory regime for stablecoin issuers in the city. Under the proposed framework, stablecoin issuers would need to obtain a license from the HKMA and have full backing for all their circulating stablecoins. The HKMA believes that stablecoins are a key channel for crypto-related risks to spill over into the traditional financial system. The consultation paper also states that issuers should regularly disclose their reserve assets to the public and have fit and proper executives. Hong Kong has been active in crypto regulation this year in an effort to become a global hub for crypto. The regulatory framework for stablecoins has been in the works since January 2022, and further details for a sandbox implementation will be released separately.
Key Points
1. Hong Kong is initiating a consultation period for a new regulatory regime for stablecoin issuers in the city.
2. Stablecoin issuers operating in Hong Kong would be required to obtain a license from the Hong Kong Monetary Authority (HKMA) under the proposed framework.
3. The consultation paper emphasizes the need for stablecoin issuers to have “full backing” for all their circulating stablecoins, citing the collapse of Terra’s partially backed UST stablecoin as a motivation for regulation.