Hong Kong has announced plans to regulate fiat-referenced stablecoins (FRS), requiring issuers to obtain a specific local license. This key point was highlighted in a consultation paper released on December 27 by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA).
The consultation period for this proposal is set to conclude on February 29, 2024. The proposed legislation clearly defines fiat-referenced stablecoins and mandates that any companies that “actively market their issuance of FRS to the public of Hong Kong” must be licensed by the HKMA.
To acquire an HKMA license, issuers must meet several criteria. These include ensuring that all circulating stablecoins are fully backed by reserves “at least equal to the par value,” segregating and safely keeping reserve assets, and adhering to disclosure and regular reporting requirements. The document also clarifies that algorithmic stablecoins will not be eligible for licensing.
Furthermore, stablecoin issuers are required to establish a registered office in Hong Kong, appointing a chief executive, senior management team, and key personnel.
Christopher Hui, the Secretary for Financial Services and the Treasury, emphasized that with the appropriate licensing framework, the risks associated with stablecoin development could be effectively managed. He noted that this regulatory step is a significant move to support the development of the Web3 ecosystem in Hong Kong.
This announcement comes in the wake of the HKMA and the Securities and Futures Commission (SFC) jointly declaring their readiness to accept applications for the authorization of various funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs). This move complements the existing framework for crypto futures ETFs, marking a significant step in Hong Kong’s approach to regulating digital assets.
Get $200 Free Bitcoins every hour! No Deposit No Credit Card required. Sign Up