The Hong Kong Monetary Authority (HKMA) has concluded a public consultation on stablecoin regulations and aims to introduce clear guidelines for the stablecoin market by the end of 2024. Joseph Chan Ho-Lim, deputy director of the Hong Kong Financial Services and Treasury Bureau, highlighted Hong Kong’s emergence as a fintech hub and expressed the authorities’ commitment to promoting the Web 3 ecosystem while prioritizing investor protection.
The process of formulating stablecoin regulations in Hong Kong began in January 2022, with the HKMA seeking policy recommendations and outlining five possible regulatory outcomes. The discussions resulted in the prohibition of algorithmic stablecoins following the Terra-Luna incident. With the public consultation phase completed, the HKMA will now focus on areas such as issuance, governance, and stabilization.
Hong Kong has taken a proactive stance in crypto regulation this year, contrasting with the cautious approach of many Western counterparts. The HKMA has opened crypto trading for retail investors and implemented a licensing regime for crypto exchanges, imposing stringent anti-money laundering regulations.
In the United States, the House Committee is also working on introducing significant regulations for the stablecoin market. Several draft bills have been proposed, with the latest granting key powers to the Federal Reserve and allowing state authorities to intervene.
The divergent approaches of local regulators in Hong Kong and the US are notable, with Hong Kong actively positioning itself as a crypto hub while the actions of US regulators may prompt established businesses, including stablecoin issuers, to consider relocating. The US Securities and Exchange Commission has accused several stablecoin issuers of violating securities laws and has filed a lawsuit against Binance and its stablecoin BUSD, issued by Paxos.
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