Hong Kong eyes stablecoin regulatory regime by 2024

Whereas the Western world debates regulate stablecoins, Hong Kong is forging forward with a regulatory framework for cryptocurrencies pegged to conventional monetary property.

The Hong Kong Financial Authority (HKMA) is within the strategy of in search of feedback from the general public concerning stablecoins and goals to introduce a regulatory framework by the tip of 2024, mentioned the town’s Undersecretary for Monetary Companies and the Treasury, Joseph Chan Ho-lim, according to local media.

Whereas the U.S. authorities is toughening its stance on the crypto industry within the wake of TerraUSD (UST)’s collapse and FTX’s implosion, the crypto group in China is heralding Hong Kong’s rising coverage clarification concerning the nascent asset class.

On June 1, Hong Kong formally set in movement a new crypto regulatory regime by which exchanges should get hold of licenses with a view to function within the metropolis. Below the brand new framework, licensed exchanges will be capable to let retail traders commerce sure main cryptocurrencies, which have been alleged to be Ether and Bitcoin.

The coverage growth is a significant milestone for the area that has ventured in the opposite direction as mainland China, the place crypto buying and selling is unlawful. The welcoming stance o Hong Kong, some have argued, is a results of the historic function the town has played as a sandbox for the rest of China.

Hong Kong’s stablecoin regulation has been a very long time coming. In January 2022, the HKMA issued a dialogue paper on crypto-assets and stablecoins. Then in January 2023, the HKMA revealed the conclusion to the dialogue paper, which confirmed that the HKMA would take a “risk-based and agile strategy” in regulating stablecoins.

Because it labored on the town’s personal crypto laws throughout 2022, the HKMA also participated in growing regulatory requirements and suggestions on stablecoins, particularly these of the Monetary Stability Board. The FSB is a global physique that screens and makes suggestions concerning the worldwide monetary system, and within the web3 realm, it has been described because the “de facto leader” in framing world crypto guidelines.

The proposed guidelines specified by the discussion paper are, after all, topic to alter, but it surely presents an early glimpse into the town’s stance on stablecoin regulation. For one, the HKMA proposed to prioritize the event of a regulatory framework for stablecoins as a method of fee and begin with regulating stablecoins pegged to fiat currencies, since they’re extra more likely to pose imminent monetary stability dangers.

As well as, the paper maintains that stablecoins have to be totally backed by high-quality and high-liquidity property always. Stablecoins that derive their worth based mostly on arbitrage or algorithm is not going to be accepted, which successfully guidelines out algorithmically stabilized tokens like UST. Stablecoin holders must also be capable to redeem the stablecoins into fiat currencies inside an affordable interval, the paper says.