Hong Kong Proposes New Rules to Regulate Stablecoin Issuers; Licensing Required
Summary:
Hong Kong's regulators have proposed new guidelines to govern fiat-referenced stablecoins (FRS), requiring issuers to acquire a local license. The rules, detailed in a discussion document by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), necessitate full backing of circulating stablecoins with equivalent reserves, isolation and safekeeping of reserve assets, continuous disclosure and reporting. The legislation also mandates that companies issuing stablecoins establish a registered office in Hong Kong. The consultation period extends to February 29, 2024.
In a bid to regulate fiat-referenced stablecoins (FRS), Hong Kong has suggested that issuers must secure a distinct local permit. This stipulation features prominently in a discussion document released by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) on December 27. The consultation phase wraps up on February 29, 2024. Detailed in the proposed bill is the definition of FRS and the requirement for firms that ardently promote FRS issuance to Hong Kong's public to secure licensing from the HKMA. The prerequisites to secure a license from the HKMA include full backing of all in-circulation stablecoins with reserves "matching the par value", isolation and secure storage of reserve assets, and routine disclosure and reporting. The paper notes that stablecoins driven by algorithms will not be eligible for licensing. Companies issuing stablecoins will also be mandated to establish a fully staffed registered office in Hong Kong comprising a CEO, a top-tier management team and crucial personnel. Christopher Hui, the Secretary for Financial Services and the Treasury maintained that with proper licensing, stablecoin-related risks could be sufficiently mitigated. He added, "The legislative proposal to regulate FRS, alongside the licensing system for VA trading platforms rolled out in June, marks another key step towards nurturing the Web3 ecosystem in Hong Kong." The HKMA, in collaboration with the Securities and Futures Commission (SFC), announced their readiness in December to accept applications for authorization of diverse funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs), in addition to the existing crypto futures ETFs.
Published At
12/27/2023 11:33:24 AM
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