- The Hong Kong Monetary Authority and the Financial Services and Treasury Bureau jointly launched a public consultation on stablecoins.
- The consultation aims to gather insights on a proposed legislative framework for regulating issuers of stablecoins.
- The proposed framework, based on a risk-based and agile approach, includes a licensing regime.
The Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) are collecting public comment on a proposed legal framework for regulating stablecoin issuers.
As stablecoins are increasingly playing a vital role in bridging the gap between traditional finance and virtual assets, the Hong Kong government thinks it is necessary to regulate them. Utilizing a flexible and risk-based approach, the suggested framework aims to control threats to monetary and financial stability.
The proposal establishes a licensing system that requires fiat-referenced stablecoin (FRS) issuers to fulfill particular requirements in order to get a license from the Monetary Authority (MA). Furthermore, the proposed framework stipulates that only certain licensed firms may provide FRs, and retail investors can only access the stablecoins that are licensed by the MA.
The proposal also includes advertising restrictions, prohibiting the advertising of FRS issuance by unlicensed entities and non-specified licensed entities’ offering of FRS.
Alongside the public consultation, the HKMA will introduce a sandbox arrangement. This platform will communicate supervisory expectations, offer guidance on compliance, and obtain feedback from entities intending to issue FRS in Hong Kong.
Government representatives have emphasized the importance of these actions. The Secretary for Financial Services and the Treasury, Christopher Hui, underlined their significance in promoting the growth of the Web3 ecosystem.
In the meantime, the HKMA’s Chief Executive, Eddie Yue, emphasized the need for legislative boundaries to promote the ethical and sustainable growth of the virtual asset ecosystem.
The consultation period starts on December 27, 2023, and lasts until February 29, 2024. The public, as well as industry participants, are invited to provide comments through designated channels.
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