- Hong Kong to introduce a regulatory regime for govern fiat-referenced stablecoin (FRS) issuers.
- The nation’s first digital bank is set to offer reserve banking services for stablecoin issuers.
Hong Kong is in the enhanced crypto regulatory frame, embracing cryptocurrency and blockchain technology, and recent policy briefs from the Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) show their clear and legible regulatory policies.
Moreover, Hong Kong launched its first spot Bitcoin and Ether ETFs in April, following the US launch of a spot Bitcoin ETF in January. Hong Kong is the first country to approve a spot ETH ETF while the U.S. SEC is yet to approve them.
Ever since the introduction of HKMA’s regulation on cryptocurrencies to protect its citizens’ financial interests and economy, the number of stablecoin issuers operating within the country gradually surged.
Last year, in February, the Hong Kong authorities announced that stablecoin providers should apply for their licenses and comply with regulations within the country. The collapse of Terraform Labs’ algo-stablecoin UST in 2022 triggered the regulators to put forward significant regulations on stablecoins. Like Hong Kong regulators, other regulators also focused on stablecoin regulation.
Amid this, they aim to invite foreign stablecoin issuers to operate within its dominion. Further, they have been taking a proactive approach to eliminate unlicensed crypto firms.
Hong Kong to Regulate Stablecoins
The regulator has notified the positive feedback from the stakeholders regarding the stablecoin regulation proposed by the entity. The Financial Services and the Treasury Bureau (FSTB) and HKMA jointly concluded the public consultation, which got concerned suggestions on the stablecoin regulation.
The consultation paper was released at the end of last year and received 108 submissions from stakeholders. They have expressed support for introducing a regulatory regime to govern fiat-referenced stablecoin (FRS) issuers. Moreover, the consensus supports the framework to eradicate financial instabilities and enhance transparency within the stablecoin market.
The FSTB and the HKMA will be considering the suggestions of respondents in finalizing the legislative proposal for implementing the regulatory regime in the legislative council.
Meanwhile, ZA Bank, the first digital bank in Hong Kong, announced their plans to provide reserve bank services for stablecoin issuers. The entity is negotiating cooperation with almost 10 stablecoin firms. The Hong Kong government requires stablecoin issuers to deposit reserve assets in banks.
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