Whereas Western nations are debating the right way to regulate stablecoins, Hong Kong is constructing a regulatory framework for cryptocurrencies pegged to conventional monetary property.
The Hong Kong Financial Authority (HKMA) is soliciting public enter on stablecoins and goals to have a regulatory framework in place by the top of 2024, in accordance with Hong Kong Municipal Undersecretary for Monetary Providers and Treasury Joseph Chan Holim. Advised. In accordance with native media.
Whereas the US authorities has stepped up its stance on the crypto business following the collapse of TerraUSD (UST) and the implosion of FTX, the Chinese language crypto neighborhood is heralding elevated coverage readability in Hong Kong concerning early asset lessons.
On June 1, Hong Kong formally launched a brand new cryptocurrency regulatory regime that requires exchanges to acquire a license to function within the metropolis. Below the brand new framework, licensed exchanges will be capable of let retail buyers commerce sure main cryptocurrencies, purported to be Ether and Bitcoin.
The coverage improvement marks a significant milestone for the area, which has gone in the other way from mainland China, the place cryptocurrency buying and selling is unlawful. Some argue that Hong Kong’s welcoming angle is a results of its historic function as a sandbox for all of China.
Stablecoin regulation in Hong Kong has been lengthy overdue. In January 2022, the HKMA printed a dialogue paper on crypto-assets and stablecoins. And in January 2023, the HKMA printed the conclusions of a dialogue paper, confirming that the HKMA will take a “risk-based and agile strategy” in regulating stablecoins.
In working by itself cryptocurrency regulation in 2022, the HKMA additionally participated in creating regulatory requirements and suggestions for stablecoins, significantly these of the Monetary Stability Board. The FSB is the worldwide physique that screens and makes suggestions for the worldwide monetary system, and within the area of Web3 has been described because the “de facto chief” in creating world cryptocurrency guidelines.
The proposed guidelines introduced within the dialogue paper are, after all, topic to vary, however present an early glimpse of the town’s stance on stablecoin regulation. For instance, the HKMA will prioritize the event of a regulatory framework for stablecoins as fee devices, beginning with regulation of stablecoins pegged to fiat foreign money, as they’re prone to pose imminent monetary stability dangers. proposed.
The paper additional argues that stablecoins should all the time be absolutely backed by high-quality, high-liquidity property. Stablecoins that derive worth primarily based on arbitrage or algorithms are unacceptable, successfully excluding algorithmically stabilized tokens like UST. Stablecoin holders may also want to have the ability to redeem their stablecoins into fiat foreign money inside an inexpensive time frame, the paper mentioned.
