Hong Kong Proposes New Licensing Regime for Stablecoin Issuers

Hong Kong Proposes New Licensing Regime for Stablecoin Issuers

by January 3, 2024

The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) have issued a consultation paper proposing a regulatory regime for stablecoin issuers in Hong Kong.

This announcement invites feedback from the public and stakeholders, signalling a significant step in fostering the healthy and sustainable development of the region’s virtual asset ecosystem.

Under the proposed regime, stablecoin issuers would be required to obtain a license from the HKMA. Requirements for licensees include local incorporation with a management presence in Hong Kong, adherence to financial resources criteria, and the implementation of an effective stabilisation mechanism.

This mechanism should involve maintaining a reserve of high-quality, liquid assets to ensure the ability to redeem stablecoins for fiat currency at par value. Licensees must also comply with governance, risk management, and AML/CFT measures.

The regime intends to establish safeguards for other entities offering or distributing stablecoins, particularly to retail investors. Only stablecoins issued by licensed entities would be accessible to this investor segment.

Additionally, the HKMA is preparing to launch a regulatory sandbox to streamline communication with potential stablecoin issuers, facilitating compliance and innovation within a regulated environment. Details of the sandbox arrangement will be announced separately.

Ronald IuHKMA Stablecoin

Ronald Iu

In response, ZA Bank CEO Ronald Iu welcomed the consultation. He anticipates that the consultation process will strengthen the future regulatory framework, enhancing security and fostering industry development.

“This, in turn, will boost retail investor confidence and contribute to establishing Hong Kong as a global hub for Web3,” he said.




Featured image credit: Edited from Freepik