Hong Kong authorities are exploring regulation of stablecoins as the latest consultation paper proposes regulation of fiat reference stablecoins (FRS)。stablecoin issuers in hong kong must obtain local licences if the proposed rules are implemented。

Steps to regulate stablecoins in Hong Kong

A consultation paper issued by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) defines a stable currency as "a currency intended to maintain a stable value by reference to one or more legal tender."。it further stipulates that companies "that actively market their fiat stablecoins issued to the hong kong public" need to obtain a licence。

The authorities will receive feedback on the proposed regulations by February 29, 2024.。The document notes that the need for such regulations became apparent after the collapse of the algorithmic stablecoin TerraUSD last year.。HONG KONG'S PROPOSED RULES WON'T ISSUE LICENSES TO STABLE COINS。

"Following the implementation of the licensing system for virtual currency trading platforms in June this year, the legislative proposal to regulate the financial services system is another important measure to promote the development of Hong Kong's Web3 ecosystem," said Secretary for Financial Services and the Treasury Rafael Hui.。

Local presence is a necessary condition

Under the proposed rules, licensed stablecoin issuers must maintain a reserve of all assets that support stablecoins, "at least equal to par value."。In addition, these reserves must be isolated and safely preserved。Companies are required to disclose their reserves and report regularly to regulators。

In addition, to obtain a license, stablecoin issuers need to set up local offices and appoint CEOs, senior management teams and other key personnel.。

Hong Kong already has regulation on the broader crypto industry。Local Regulators Now Issue Licenses to Cryptocurrency Exchanges。Some cryptocurrency exchanges have established local operating bases in Hong Kong。However, under existing regulations, trading against stablecoins is not allowed in Hong Kong.。

At the same time, stablecoins have become the focus of many regulators。In addition to Hong Kong, Singapore has also introduced a number of rules to regulate so-called stablecoins.。