Hong Kong Proposes new Regulatory Regime for Stablecoin Issuers Alongside Sandbox Surroundings


As innovation continues within the digital asset area, regulatory authorities in Hong Kong have proposed new regulatory guidelines for stablecoin issuers. 

The Monetary Providers and the Treasury Bureau (FSTB) and the Hong Kong Financial Authority (HKMA) collectively issued a public session paper on 27 December 2023 relating to a brand new legislative proposal for implementing the regulatory regime for stablecoin issuers in Hong Kong.

Beneath the proposed regime, issuers would require a license from the HKMA to challenge stablecoins that reference the worth of a number of fiat currencies in Hong Kong.

As a part of these necessities, licensees would wish to take care of a pool of reserve property (resembling financial institution deposit in matching currencies, and short-term debt securities) with correct custody association, to make sure that customers can redeem the stablecoins for fiat forex at par. Licensees would additionally must adjust to related governance, danger administration and AML/CFT measures.

Based on the Hong Kong authorities, bringing fiat-referenced stablecoin (FRS) issuers underneath its regulatory remit will help the administration of potential financial and monetary stability dangers, and supply clear and appropriate guardrails with the elevated prevalence of digital property.

Eddie Yue, chief executive at HKMA
Eddie Yue, chief govt at HKMA

Eddie Yue, chief govt at HKMA, additionally defined: “In an ever-changing market, it might be vital to maintain abreast of the newest developments, in addition to to place in place a regulatory regime that strikes stability between safeguarding monetary stability and embracing innovation.

“With this in thoughts, the HKMA plans to roll out a ‘sandbox’ to facilitate the communication of our supervisory expectations with entities which can be enthusiastic about issuing stablecoins in Hong Kong.”

‘Seizing the chance’

Ronald Iu, CEO of ZA Financial institution, the Hong Kong-based digital financial institution, additionally revealed enthusiasm for the regulatory ideas: “ZA Financial institution warmly welcomes the general public session paper collectively issued as we speak by the FSTB and HKMA relating to the proposed laws for regulating stablecoin issuers. We additionally respect the HKMA’s introduction of sandbox association, as we imagine that trade suggestions can be extremely valued by the authorities.

Ronald Iu, CEO of ZA Bank
Ronald Iu, CEO of ZA Financial institution

“We anticipate that this session course of will strengthen the long run regulatory framework, offering better safety and fostering the event of the trade. This, in flip, will improve the arrogance of retail buyers and contribute to establishing Hong Kong as a world hub for Web3.

“As a technology-driven financial institution, our ambition is to be the popular banking companion of Hong Kong’s Web3 ecosystem, guided by our ‘Banking for Web3’ imaginative and prescient. Now we have already supplied important enterprise banking providers to over 80 Web3 corporations and have served because the banking companion for licensed digital asset buying and selling platforms (VATPs) in Hong Kong. Leveraging our related expertise, we’re greater than prepared to supply help and help to each the authorities and the trade.

“We firmly imagine that digital property will develop into a big asset class for future investments. Inside a safe regulatory surroundings, we eagerly anticipate seizing the chance to supply customers with new funding potentialities led to by Web3.”

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