Hong Kong Launches Stablecoin Regulation: Enters Public Consultation and Innovation "Sandbox" Program
With the rapid development of financial technology, especially in the field of Web3 and virtual assets, the Financial Services and the Treasury Bureau of Hong Kong and the Hong Kong Monetary Authority jointly announced legislative proposals on the regulatory regime for stablecoin issuers, marking a new step for Hong Kong in the regulation of virtual assets.
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Legislative Proposal for Stablecoins in Hong Kong
Given the significant role stablecoins play in the Web3 and virtual asset ecosystem, and the increasing integration between traditional financial systems and the virtual asset market, the Hong Kong government deems it necessary to regulate issuers of fiat-backed stablecoins to manage currency and financial stability risks associated with them.
Core Elements of Regulatory Framework: Licensing Regime
The legislative proposal includes the introduction of a licensing regime that stipulates only specific licensed entities can offer services for purchasing fiat-backed stablecoins, prohibits the promotion of fiat-backed stablecoins by unlicensed issuers, empowers authorities to respond to rapid market changes, and provides transitional arrangements for the smooth implementation of the regulatory framework.
Launch of "Sandbox" Program
To facilitate the implementation of the regulatory framework, the Hong Kong Monetary Authority (HKMA) will introduce a "sandbox" arrangement to provide regulatory guidance to issuers planning to issue fiat-backed stablecoins in Hong Kong and collect their feedback on the proposed regulatory requirements.
Official Perspective: Crucial for the Development of Hong Kong's Web3 Ecosystem
The Financial Secretary, Paul Chan, and Chief Executive of the HKMA, Eddie Yue, both emphasized the importance of the legislative proposal to regulate stablecoin issuers in advancing the development of Hong Kong's Web3 ecosystem and implementing necessary regulatory requirements and standards to support the long-term, sustainable development of the virtual asset ecosystem.
Public Consultation Period: From December 27, 2023, to February 29, 2024