Whereas the Western world debates methods to regulate stablecoins, Hong Kong is shifting ahead with a regulatory framework for cryptocurrencies tied to conventional monetary belongings.
The Hong Kong Financial Authority (HKMA) is at present looking for public feedback on the stablecoins and goals to have them by 2024. introduce a regulatory framework by the top of the 12 months, stated Joseph Chan Ho-lim, deputy secretary of the town’s monetary companies and treasury. in keeping with native media.
Because the US authorities tightens its stance on the crypto trade following the collapse of TerraUSD (UST) and the collapse of FTX, China’s crypto neighborhood is issuing a rising interpretation of Hong Kong’s coverage on the rising asset class.
June 1 Hong Kong has formally launched a brand new cryptocurrency regulatory regime that requires exchanges to acquire licenses to function within the metropolis. Beneath the brand new system, licensed exchanges will have the ability to enable retail buyers to commerce sure main cryptocurrencies, that are believed to be Ether and Bitcoin.
The event of the coverage is a vital milestone for the area, which has moved in the wrong way to mainland China, the place cryptocurrency buying and selling is unlawful. Some have argued that Hong Kong’s welcoming angle is the results of the town’s historic position as a sandbox for the remainder of China.
Regulation of Hong Kong stablecoins has been accepted for a very long time. in 2022 month of January. The HKMA has printed a dialogue paper on cryptocurrency and stablecoins. Then in 2023 month of January. The HKMA launched a dialogue paper conclusion confirming that the HKMA will undertake a “risk-based and agile method” to its regulation of stablecoins.
As a result of in 2022 labored on the Metropolis’s cryptocurrency laws, the HKMA has additionally been concerned in growing regulatory requirements and tips for stablecoins, notably the Monetary Stability Board. The FSB is a world physique that displays and makes suggestions on the worldwide monetary system, and has been described by web3 because the “de facto chief” in growing international cryptocurrency laws.
The proposed guidelines outlined within the dialogue paper are topic to vary, after all, but it surely offers an early have a look at the town’s place on stablecoin regulation. On the one hand, the HKMA urged that it ought to prioritize the event of a regulatory framework for stablecoins as technique of cost and begin with the regulation of stablecoins linked to fastened currencies, as they’re extra more likely to pose imminent dangers to monetary stability.
Moreover, the paper states that stablecoins ought to at all times be absolutely hedged by high-quality and extremely liquid belongings. Stablecoins whose worth is set primarily based on arbitrage or an algorithm won’t be accepted, basically ruling out algorithmically stabilized tokens reminiscent of UST. Stablecoin holders must also have the ability to redeem stablecoins for fiat currencies inside an inexpensive time frame, the article says.
