Whereas the Western world debates methods to regulate stablecoins, Hong Kong is forging forward with a regulatory framework for cryptocurrencies pegged to conventional monetary property.
The Hong Kong Financial Authority (HKMA) is within the technique of searching for feedback from the general public concerning stablecoins and goals to introduce a regulatory framework by the top of 2024, stated town’s Undersecretary for Monetary Companies and the Treasury, Joseph Chan Ho-lim, in keeping with native media.
Whereas the U.S. authorities is toughening its stance on the crypto business within the wake of TerraUSD (UST)’s collapse and FTX’s implosion, the crypto group in China is heralding Hong Kong’s growing coverage clarification concerning the nascent asset class.
On June 1, Hong Kong formally set in movement a new crypto regulatory regime during which exchanges should get hold of licenses with a purpose to function within the metropolis. Underneath the brand new framework, licensed exchanges will have the ability to let retail traders commerce sure main cryptocurrencies, which have been alleged to be Ether and Bitcoin.
The coverage improvement is a serious milestone for the area that has ventured in the other way as mainland China, the place crypto buying and selling is against the law. The welcoming stance o Hong Kong, some have argued, is a results of the historic function town has performed as a sandbox for the remainder of China.
Hong Kong’s stablecoin regulation has been a very long time coming. In January 2022, the HKMA issued a dialogue paper on crypto-assets and stablecoins. Then in January 2023, the HKMA revealed the conclusion to the dialogue paper, which confirmed that the HKMA would take a “risk-based and agile method” in regulating stablecoins.
Because it labored on town’s personal crypto rules throughout 2022, the HKMA additionally participated in growing regulatory requirements and proposals on stablecoins, particularly these of the Monetary Stability Board. The FSB is a world physique that screens and makes suggestions concerning the worldwide monetary system, and within the web3 realm, it has been described because the “de facto chief” in framing international crypto guidelines.
The proposed guidelines specified by the dialogue paper are, after all, topic to vary, but it surely gives an early glimpse into town’s stance on stablecoin regulation. For one, the HKMA proposed to prioritize the event of a regulatory framework for stablecoins as a way of fee and begin with regulating stablecoins pegged to fiat currencies, since they’re extra more likely to pose imminent monetary stability dangers.
As well as, the paper maintains that stablecoins have to be absolutely backed by high-quality and high-liquidity property always. Stablecoins that derive their worth primarily based on arbitrage or algorithm won’t be accepted, which successfully guidelines out algorithmically stabilized tokens like UST. Stablecoin holders must also have the ability to redeem the stablecoins into fiat currencies inside an inexpensive interval, the paper says.