Regulation
HKMA and FSTB announce licensing regime for stablecoin issuers
The Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) have taken the first step in regulating these tokens by unveiling a new licensing framework for fiat-pegged stablecoins.
Meanwhile, the new framework was unveiled after a two-month consultation that ended in February and attracted 108 submissions from industry players and institutes.
The new rules now stipulate that all FRS issuers must be licensed by the HKMA. The licensing criteria include factors such as the language used in marketing, target demographic and domain names to verify whether an entity is actively promoting FRS to the Hong Kong public. Stablecoin Issuers must also ensure that full reserve asset backing is maintained at all times to avoid potential panics and ensure ecosystem stability.
Industry reaction to the regulatory framework
The survey showed that the need for regulation of the sector was well understood, with most respondents approving the measures. Regulators also stressed that stablecoins should be fully backed by reserve assets to avoid situations where stablecoins are referenced to fiat currency. They pointed out that the lack of adequate reserves can contribute to stablecoin runs, and thus to the stability of the entire system.
Under the new framework, the HKMA is also handling applications to establish a sandbox programme for stablecoin issuers. Launched in March this year, this is a policy aimed at establishing an innovation sandbox to prepare the legal framework for the future. Details of the participants in the sandbox programme are expected to be announced in the coming weeks.
Market impact and global context
The new rules are expected to attract more stablecoin issuers to Hong Kong. Vincent Chok, CEO of First Digital, pointed out that there is clear market interest and demand for the cryptocurrency licensing process, with the new regulations being in line with positive trends in the cryptocurrency market.
In parallel, spot Bitcoin ETFs Bitcoin ETFs based in Hong Kong and Australia have attracted a considerable amount of investment. Hong Kong-based Bitcoin ETFs added 28.6% more Bitcoin to their portfolios between June 21 and July 13, holding 4,941 BTC in total.
These events take place against the backdrop of global market changes such as a large-scale sell-off by the German government and renewed interest in the global BTC ETF market, which now numbers 1.05 million BTC.
The Future of Cryptocurrency Regulation in Hong Kong
Hong Kong authorities are continuing their work on preparing the bill and plan to submit it to the Legislative Council as soon as possible. This approach is in line with Hong Kong’s overall plan to become a cryptocurrency and blockchain hub with adequate consumer protection and financial stability.
Improving a comprehensive set of rules and regulations for stablecoins could serve as a model for other jurisdictions. Hong Kong This model could become a reference for other jurisdictions, as authorities have focused on developing innovation while maintaining control over the industry. This action could lead other regions to create similar frameworks that will create a safer environment for digital assets.