April 19, 2024
Hong Kong Mandates Licenses for Stablecoin Issuers
Latest Cryptocurrency News

Hong Kong Mandates Licenses for Stablecoin Issuers

Hong Kong is set to introduce a regulatory framework for fiat-referenced stablecoins (FRS), as outlined in a consultation paper jointly published on December 27 by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA).

The proposal stipulates that while the city will accept and oversee FRS, issuers must obtain a specific local license. The consultation period extends until February 29, 2024, allowing stakeholders to provide input. The licensing criteria laid out by the HKMA include a mandate for stablecoin issuers to fully back all circulating stablecoins with reserves “at least equal to the par value.”

Further requirements encompass the segregation and safekeeping of reserve assets, transparent disclosure practices, and regular reporting. Notably, the proposal explicitly excludes algorithmic stablecoins from eligibility for an HKMA license. Additionally, stablecoin issuers seeking approval will be obligated to establish a registered office in Hong Kong, complete with a chief executive, senior management team, and key personnel.

This move aligns with the authorities’ objective to enhance oversight and mitigate potential risks associated with stablecoin development.

“With the implementation of the licensing regime for VA trading platforms from June this year, the legislative proposal to regulate FRS is another important measure facilitating Web3 ecosystem development in Hong Kong.”

Christopher Hui, the Secretary for Financial Services and the Treasury emphasized that obtaining the proposed HKMA license would enable effective risk management for stablecoin initiatives. In a related development, the HKMA and the Securities and Futures Commission (SFC) jointly announced their preparedness to accept applications for the authorization of various funds.

It includes Virtual Asset Spot exchange-traded funds (VA Spot ETFs), in addition to existing crypto futures ETFs, underscoring Hong Kong’s commitment to fostering a regulated environment in the evolving digital asset landscape.

Image by katemangostar on Freepik

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