While the Western world is discussing the regulation of stablecoins, Hong Kong is taking concrete measures to create a regulatory framework for the process of using cryptocurrency, which is tied to traditional financial assets.
The Hong Kong Monetary Authority (HKMA) is currently awaiting comments from members of the public about stablecoins and has already announced its intention to create a system of norms to regulate this new generation of currency by the end of 2024. The corresponding statement was made by the Deputy City Minister for Financial Services and Treasury, Joseph Chan Ho-Lim.
The US government has changed its position in the crypto industry after the collapse of TerraUSD (UST) and FTX. In this case, there was a tightening of the position. The Chinese crypto community foreshadows a clarification of Hong Kong’s policy regarding the emerging asset class.
Last week, on June 1, a new cryptocurrency regulation regime began operating in Hong Kong. This system of legal control provides that exchanges must have licenses to operate in the city. Exchanges that have received licenses will be able to allow retail investors to trade major cryptocurrencies, among which, according to preliminary information, are Ether and Bitcoin.
For Hong Kong, the creation of a concept of activity in the field of regulation of digital assets is of particular importance. It is noteworthy that this legal policy is contrary to the position of mainland China, where cryptocurrency trading is an illegal practice. Some experts argue that Hong Kong’s activities in this area are largely due to the historical role of the city, which is often called a sandbox for the rest of the Chinese state.
The regulation of stablecoins in the Hong Kong financial system is an issue that has been discussed for a long period. In January 2022, the HKMA issued a document on crypto assets and stablecoins. A year later, the conclusion to this document was published. After that, the HKMA’s intention to apply a flexible risk-based approach to the regulation of stablecoins was officially indicated.
The Monetary Authority also participated in the creation of regulatory standards and recommendations on stablecoins over the past year.
The legal framework proposed for approval may undergo various changes, but it gives a clear idea of the city’s position on the regulation of digital assets. Currently, it is clear that the HKMA pays priority attention to the creation of a regulatory framework for stablecoins as a means of payment and in this case plans to start with a new generation of assets tied to fiat currencies, since they entail inevitable risks to financial stability.
The proposed norms also provide that stablecoins should be provided with high-quality and highly liquid assets.
As we have reported earlier, UAE and Hong Kong Strengthen Financial Cooperation.
