In Hong Kong, local financial authorities have proposed to develop and implement new regulatory rules for issuers of stablecoins, which can be described as a reaction to ongoing changes in the sphere of virtual assets.
The Financial Services and the Treasury Burea (FSTB) and Hong Kong Monetary Authority (HKMA) last week released a joint public consultation document. In this case, it is meant to consider the issue of a new regulation regime for stablecoins.
The preliminary version of the new rules stipulates that issuers of the specified virtual assets must obtain an HKMA license to issue digital money data referenced to the value of one or more fiat currencies in Hong Kong.
Also, the document, which is not the final version of the regulatory regime, notes that the licensee must maintain a pool of reserve assets. In this case, it means a bank deposit in the appropriate currencies and short-term debt securities with an appropriate storage mechanism. The authors of the preliminary version of the regulatory regime stated that this rule is necessary to ensure that users will have the opportunity to exchange stablecoins for fiat currencies at face value.
Also, the document released last week stipulates that licensees are required to comply with certain measures in the sphere of corporate governance, risk management, and AML/CFT.
The Hong Kong government believes that the appearance of issuers of stablecoins referenced to fiat currencies in the area of its regulatory authority is the right decision. This point of view is based on the confidence that such a control system will improve the management of potential risks to monetary and financial stability. The Hong Kong government also believes that the proposed decision on the regulation of stablecoin issuers will ensure transparent and suitable guardrails against the background of intensification and scaling of the process of distribution of virtual assets.
Eddie Yue, Executive Director of HKMA, said that in a market where changes are constant, it is important to keep up to date with the latest developments. According to him, regulation is also important in the mentioned digital asset distribution space, which can ensure a balance between financial stability and the introduction of innovative solutions.
Eddie Yue separately noted that the HKMA plans to introduce a so-called sandbox, which will simplify the process of communication between supervisory authorities and organizations interested in issuing stablecoins in Hong Kong.
Ronald Iu, CEO of ZA Bank, a virtual financial institution based in the mentioned region, positively evaluates the regulatory proposal. The digital lender he heads welcomes the document unveiled last week, enthusiastically embracing the idea of creating a legislative framework that implements the norms of activity of stablecoin issuers. Ronald Yu also positively assessed the intention to create the specified sandbox, noting in this context that industry feedback is important to the authorities.
The head of the virtual bank expects that the consultation process will strengthen the future regulatory framework and provide a higher level of security. He also believes that this initiative will contribute to the development of the industry.
The new legislation has the potential to increase the confidence of retail investors and could contribute to strengthening Hong Kong’s status as a global Web3 hub.
Ronald Iu stated that the technology-oriented financial institution he heads aims to become the preferred banking partner of Hong Kong’s Web3 ecosystem. ZA Bank has already provided services to more than 80 companies in the mentioned ecosystem. The financial institution is also a partner for licensed platforms for trading virtual assets.
The head of ZA Bank stated his readiness to offer support to the authorities and the industry as part of the implementation of new legislation, which is not yet an approved regulatory framework, existing in the form of a proposal to be discussed.
Ronald Iu is convinced that digital assets will eventually become an important category for future investments. According to him, in a reliable regulatory environment, his bank will be able to offer users new investment opportunities provided by Web3.
As we have reported earlier, Economists Worsen Hong Kong’s Growth Outlook.
