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Hong Kong has unveiled a public consultation paper to obtain feedback on legislation to regulate fiat-referenced stablecoins (FRS) and require issuers to obtain a local license.
The consultation paper, published by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), outlines the definition of FRS and the licensing requirements for issuers.
To obtain an HKMA license, stablecoin issuers must meet several criteria, including
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Full backing of all circulating stablecoins with reserves “at least equal to the par value”
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Segregation and safekeeping of reserve assets
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Disclosure and regular reporting.
Algorithmic stablecoins will not be eligible for a license.
Stablecoin issuers must also establish a registered office in Hong Kong with a chief executive, senior management team, and key personnel.
The proposed licensing regime aims to manage the risks associated with stablecoin development and facilitate the growth of the Web3 ecosystem in Hong Kong.
Mr Eddie Yue, Chief Executive of the HKMA, said:
“We are supportive of financial innovation and believe that it is essential to put in place the necessary regulatory guardrails and standards to enable the long-term, sustainable and responsible development of the virtual asset ecosystem.”
The consultation period ends on February 29, 2024. The HKMA and the SFC have also expressed their readiness to receive applications for the authorization of various funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs).
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