HKMA Releases Regulatory Framework for Stablecoins in Hong Kong

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• The Hong Kong Monetary Authority (HKMA) has released the consultation conclusion to the discussion paper on crypto and stablecoins, summarizing the feedback from 58 submissions.
• The new regulatory framework for stablecoins in Hong Kong is expected in 2023/24, either in the form of new legislation or amendments to the existing laws.
• Algorithmic stablecoins are not accepted, and stablecoin holders should be able to redeem the stablecoins into the referenced fiat currency at par within a reasonable period.

The Hong Kong Monetary Authority (HKMA) recently released the consultation conclusion to the discussion paper on crypto and stablecoins, summarizing the feedback from 58 submissions. The new regulatory framework for stablecoins in Hong Kong is expected in 2023/24, either in the form of new legislation or amendments to the existing laws.

The HKMA’s consultation paper highlighted several key principles for the upcoming regulatory framework. The regulator will demand all stablecoin issuers back their values with underlying reserve assets at all times. Algorithmic stablecoins are not accepted, and stablecoin holders should be able to redeem the stablecoins into the referenced fiat currency at par within a reasonable period.

In addition, the HKMA will require all stablecoin issuers conducting activity in Hong Kong directly, or those companies actively marketing their products to the Hong Kong public, to obtain a license. The licensing process is designed to ensure that the issuers are able to meet the regulatory requirements of the HKMA.

The HKMA believes that this new regulatory framework will promote financial stability, protect investors and consumers, promote fair competition and maintain the reputation of Hong Kong as an international financial center.

The HKMA expects the new regulatory regime for stablecoins in Hong Kong to arrive no later than 2024. This will provide a legal and regulatory framework for the issuance, circulation and trading of stablecoins in Hong Kong, allowing the industry to develop in a orderly and safe manner.

The HKMA is confident that this new regulatory framework will help to ensure the safety and stability of the financial system, as well as protect investors and consumers. It is also expected that the framework will promote fair competition, innovation and the development of the industry.