Hong Kong’s financial regulatory bodies have announced significant progress in the establishment of a licensing framework for stablecoin issuers, marking a pivotal development in the oversight of the digital currency sector within the region.
In a joint statement released by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB), authorities revealed that a majority of stakeholders supported the introduction of a regulatory regime specifically tailored for fiat-referenced stablecoin (FRS) issuers. The conclusion stems from a thorough consultation process that garnered insights from 108 submissions comprising industry players and professional entities over a two-month period ending in February.
Central to the proposal is the requirement for all FRS issuers to obtain a license from the HKMA. This stipulation aims to ensure robust oversight, considering factors such as the issuer’s jurisdiction of incorporation, operational base, customer service provisions, and the use of Hong Kong-based bank accounts for processing issuance and redemption requests.
Addressing concerns raised during the consultation, authorities clarified that the regulatory scope would extend to activities involving the promotion and issuance of FRS within Hong Kong. Factors determining whether an entity is ‘actively marketing’ FRS to the local public would include the language and target audience of marketing materials, as well as the domain names utilized.
Moreover, regulators underscored the necessity for FRS issuers to maintain full backing of reserve assets at all times to safeguard against potential liquidity risks. They emphasized that any issued FRS must be fully supported by reserve assets to maintain confidence and prevent destabilization of the ecosystem.
Looking ahead, the HKMA and FSTB are poised to finalize the legislative framework and submit a bill to the Legislative Council expeditiously. This anticipated move follows the HKMA’s earlier establishment of a sandbox environment in March, designed to facilitate trials for stablecoin issuers, thereby paving the way for future regulatory measures.
Vincent Chok, CEO of First Digital, a prominent stablecoin issuer, expressed optimism about the regulatory progress, noting substantial market demand. “We are aware of significant interest in applying for Hong Kong stablecoin licensing,” Chok remarked in March, underscoring the industry’s readiness to comply with forthcoming regulations.
