Hong Kong Authorities Propose Regulation for Stablecoins
Hong Kong authorities have put forward a proposal to accept and regulate fiat-pegged stablecoins (FRS). The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) plan to allow retail investors to purchase stablecoins, but issuers must obtain a special local HKMA license. Companies seeking a license will need to fully support all stablecoins with reserves equal to their face value, segregate and custody reserve assets, provide disclosure and regular reporting, and establish an office in Hong Kong with key personnel. However, Algorithmic Stablecoin Issuers will not be eligible for a license.
“Implementing law enforcement and enforcement arrangements can properly manage the actual and potential risks associated with developing stablecoins in Hong Kong and be consistent with international standards.”
Hui Ching, Director of the Treasury Bureau
Expansion of Cryptocurrency Trading in Hong Kong
In May, the Securities and Futures Authority (SFC) in Hong Kong decided to officially allow retail investors to trade cryptocurrencies. Retail investors will have the opportunity to sell Bitcoin (BTC) and Ether (ETH), subject to strict security measures. To be eligible for retail trading, cryptocurrencies must have a clean track record with no “bad incidents” for 12 months and be included in at least two indices. Additionally, the SFC announced in December that it is ready to accept applications for cryptocurrency ETFs, indicating a growing acceptance of digital assets in Hong Kong.
Hot Take: Embracing Stablecoin Regulation in Hong Kong
Hong Kong’s proposal to regulate fiat-pegged stablecoins demonstrates its commitment to managing risks associated with digital currencies while aligning with international standards. By allowing retail investors to purchase stablecoins, Hong Kong authorities are embracing the potential of these assets. The requirement for issuers to obtain a special license and meet specific criteria ensures transparency, accountability, and investor protection. This move follows the expansion of cryptocurrency trading in Hong Kong, which has opened up new opportunities for retail investors. With the acceptance of stablecoins and the readiness to accept cryptocurrency ETF applications, Hong Kong is positioning itself as a crypto-friendly jurisdiction.
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