As Hong Kong seeks to become the next crypto hub, the regulators are geared toward creating friendly regulations for digital assets. In a recent publication, the Hong Kong authority accepted the issuance of stablecoins in the region.
The December 27 consultation report demonstrated that the regulators intend to supervise the issuing and distributing of fiat-referenced stablecoins (FRS). The new provision mandates the stablecoin issuers to comply with the new licensing requirements.
Hong Kong Formulates New Rules for Stablecoin Issuers
The primary objective of the consultation report is to ensure that the stablecoin industry in Hong Kong is well supervised. Interestingly the Financial Services and the Treasury Bureau (FSTB) and Hong Kong Monetary Authority (HKMA) co-authored the report.
The regulators urged the community to provide valuable insights concerning the consultation paper before the end of February next year. A review of the consultation report demonstrated that the regulators plan to ensure the stablecoin issuers in the Hong Kong market comply with the HKMA licensing requirements.
Also the report outlined the importance of FRS and the need to regulate the issuance of stablecoins in Hong Kong. Beyond this, the consultation report highlighted the procedure and the requirements for obtaining the HKMA license.
Firstly, the stablecoin issuer must disclose the exact amount of stablecoin, including the reserve available for supply. The report demonstrated that the available stablecoin should equal the par value.
Hong Kong Seeks to Become Global Web3 Hub
Additionally, the regulators have tasked the stablecoin issuers with duties to segregate reserve assets and practice safekeeping of the stablecoins. Under the consultation paper, the regulators confirmed that the entities issuing the algorithmic stablecoins would not qualify for HKMA licensing.
Besides obtaining the license, the regulators stated that the local stablecoin issuer must have regional offices in Hong Kong. These offices should have a functional management team led by the chief executive in collaboration with the senior management officers and other professionals in the crypto and blockchain field.
In an interview with the secretary at FSTB, Christopher Hui argued that the new licensing approach for stablecoin will assist in mitigating the risks associated with digital assets. The executive recalled recent regulation for crypto assets that took effect in June.
He stated that the new licensing regime for exchanges and trading platforms engaging in the buying and selling of cryptocurrency forstered the development of Web3 technologies. Hui believes that implementing new provisions for stablecoins aims to position Hong Kong as a go-to destination for crypto and Web3 firms.
Future of the Hong Kong Crypto Sector
Elsewhere, the chief executive of ZA Bank, Ronald Iu, revealed that the newly launched consultation paper aims to strengthen the regulatory framework for digital assets. The CEO envisages that implementing new rules for stablecoin will support the crypto industry’s growth.
Iu believes that with the new measure, the stablecoin issuers will provide customers with a safe and secure platform to trade their digital assets. Following the resurfacing of the bears markets the customers lost confidence in crypto assets. Despite the uncertainities in the digital space the executive believes that the new rules will restore the customers’ confidence in matters concerning crypto investments.
In a separate report, the chief executive of HKMA, Eddie Yue, stated that the regulators are supporting the development of financial innovation. The CEO underlined the significance of embracing regulatory standards and measures that foster the development of the crypto sector.
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