Hong Kong Proposes to Issue an Operating License for Stablecoins

Hong Kong proposes to issue an operating license for stablecoins

The Financial Services and Treasury Board (FSTB) and the Hong Kong Monetary Authority (HKMA) have just announced a series of new proposals to increase oversight of stablecoin issuers. Specifically, these Hong Kong proposals will issue licenses and establish a “sandbox” to provide compliance guidance for organizations planning to operate in this field.

The Hong Kong government is collecting opinions on legislative proposals to supervise stablecoin issuers, requiring that only stablecoins issued by licensed issuers can be sold to retail investors, and will also launch a sandbox arrangement. The consultation period runs from 27…

— Wu Blockchain (@WuBlockchain) December 27, 2023

According to the proposal, organizations applying to issue stablecoins will have to operate according to the following process: first, they must be legally established, followed by applying for a license from the HKMA and applying a reserve mechanism assets with high levels of liquidity.

“Only licensed entities are permitted to offer stablecoins to individual investors, provided that the stablecoin is pegged to one or more fiat currencies in Hong Kong.”

Besides the operating license requirement, the proposal also mentions granting stablecoin issuers the “necessary powers” to “regulate stablecoin indexes”.

Legislative proposals will be subject to public comments by authorities before making an official decision. The consultation period lasts from December 27, 2023 to February 29, 2024.

While the new proposal could be an important step to strengthen governance and ensure stability and safety for cryptocurrency investors, it could also have an impact on the overall operations of exchanges cryptocurrency transactions and at the same time can lead to unwanted consequences in the market.

Johnny Ng, a Hong Kong parliamentarian, expressed concern saying:

“Regulators need to consider the fact that some large international stablecoins are still circulating in the market without registration in Hong Kong. Relevant regulators should consider how to This stablecoin can be integrated on licensed exchanges in Hong Kong according to international standards. Otherwise, it will affect overall virtual asset trading volume and activity, leading to counterproductive effects in the market.”

今天下午金管局發佈就香港實施穩定幣發行人監管制度的諮詢，當中提及方向性意見和管理辦法。對於推動虛擬資產行業在香港發展，本人表示非常歡迎，但縱觀整份文件我有以下意見及看法:

1. 政策暫未考慮到散戶交易應用和與國際穩定幣公司接軌？… pic.twitter.com/GZrg8710BW

— Johnny Ng 吴杰庄 (@Johnny_nkc) December 27, 2023

Hong Kong is one of the most open jurisdictions for cryptocurrencies in 2023. After officially promulgating a law governing crypto exchanges in June, authorities here also encouraged The banking industry actively cooperates with crypto companies. By December, Hong Kong authorities expressed a desire to become a “destination” for Bitcoin Spot ETF proposals.

The latest proposal from the FSTB and HKMA, along with a statement from the Hong Kong Secretary for Financial Services and Treasury in October 2023, is making clearer the local regulator’s intention to restrict citizens engaging in trading of stablecoins “beyond jurisdiction”.

It seems that this is a “gradual opening” step for the HKDG stablecoin issued by the Hong Kong Government. Government ownership of a stablecoin will create a bridge between traditional finance and blockchain technology, increasing transparency and facilitation of currency transactions, while improving the payment system and promoting economy in Hong Kong.