Key Insights
- Hong Kong regulators conclude public consultation on licensing regime for fiat-referenced stablecoin issuers, with majority support for new regulations.
- Proposed framework requires HKMA licenses for stablecoin issuers and mandates full backing of issued stablecoins with reserve assets at all times.
HONG KONG (MarketsXplora) -Hong Kong’s financial regulators have taken a significant step towards establishing a comprehensive framework for stablecoin oversight, following the conclusion of a public consultation on licensing requirements for fiat-referenced stablecoin (FRS) issuers.
The Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) jointly announced the results of their two-month consultation, which ended in February. The regulatory bodies received 108 submissions from industry participants and professional institutions, with the majority supporting the introduction of a regulatory regime for FRS issuers.
Central to the proposed framework is the requirement for all FRS issuers to obtain a license from the HKMA. The regulator outlined several factors it will consider in the licensing process, including the issuer’s place of incorporation, operational location, customer service provisions for FRS users, and the use of Hong Kong bank accounts for issuance and redemption processes.
Responding to requests for clarity on the scope of regulation, the HKMA stated it would assess multiple factors to determine whether an entity is “actively marketing” FRS issuance to the Hong Kong public. These factors include the language used in marketing messages, the target audience, and the domain names employed.
A key point of discussion was the requirement for FRS issuers to maintain full backing of their stablecoins at all times. The regulators emphasized the importance of this measure, stating that the amount of FRS issued “must always be fully backed by reserve assets at any given point in time.” This stipulation aims to prevent potential runs on FRS and maintain confidence in the ecosystem.
The HKMA and FSTB are now working to finalize the legislative proposal and plan to introduce a bill to the Legislative Council “as soon as possible.” This move follows the HKMA’s March announcement of a sandbox for stablecoin issuers, designed to facilitate the development of future regulations. The authority is currently processing applications for the sandbox and expects to announce the list of participants in the near future.
Industry interest in Hong Kong’s stablecoin regulations appears robust. Vincent Chok, CEO of First Digital, the company behind the FDUSD stablecoin, told The Block in March that there was “good” market demand, adding,
“We know that there are a lot of people that are lining up to apply for this Hong Kong stablecoin licensing as well.”
Meet Samson Ononeme, a dynamic writer, editor, and CEO of marketsxplora.com. With a passion for words and a sharp business acumen, he captivates readers with captivating storytelling and delivers insightful market analysis.