Whereas Western international locations are debating easy methods to regulate stablecoins, Hong Kong is constructing a regulatory framework for cryptocurrencies pegged to conventional monetary property.

The Hong Kong Financial Authority (HKMA) is soliciting public enter on stablecoins and goals to have a regulatory framework in place by the top of 2024, in response to Hong Kong Municipal Undersecretary for Monetary Providers and Treasury Joseph Chan Holim. Informed. In keeping with native media.

Whereas the US authorities has stepped up its stance on the crypto trade following the collapse of TerraUSD (UST) and the implosion of FTX, the Chinese language crypto group is heralding elevated coverage readability in Hong Kong relating to early asset lessons.

On June 1, Hong Kong formally launched a brand new cryptocurrency regulatory regime that requires exchanges to acquire a license to function within the metropolis. Below the brand new framework, licensed exchanges will be capable to let retail buyers commerce sure main cryptocurrencies, imagined to be Ether and Bitcoin.

The coverage growth marks a serious milestone for the area, which has gone in the other way from mainland China, the place cryptocurrency buying and selling is against the law. Some argue that Hong Kong’s welcoming perspective is a results of its historic function as a sandbox for all of China.

Stablecoin regulation in Hong Kong has been lengthy overdue. In January 2022, the HKMA printed a dialogue paper on crypto-assets and stablecoins. And in January 2023, the HKMA printed the conclusions of a dialogue paper, confirming that the HKMA will take a “risk-based and agile method” in regulating stablecoins.

In working by itself cryptocurrency regulation in 2022, the HKMA additionally participated in growing regulatory requirements and proposals for stablecoins, notably these of the Monetary Stability Board. The FSB is the worldwide physique that screens and makes suggestions for the worldwide monetary system, and within the subject of Web3 has been described because the “de facto chief” in growing world cryptocurrency guidelines.

The proposed guidelines introduced within the dialogue paper are, in fact, topic to vary, however present an early glimpse of the town’s stance on stablecoin regulation. For instance, the HKMA will prioritize the event of a regulatory framework for stablecoins as cost devices, beginning with regulation of stablecoins pegged to fiat foreign money, as they’re more likely to pose imminent monetary stability dangers. proposed.

The paper additional argues that stablecoins should at all times be totally backed by high-quality, high-liquidity property. Stablecoins that derive worth primarily based on arbitrage or algorithms are unacceptable, successfully excluding algorithmically stabilized tokens like UST. Stablecoin holders should be capable to redeem their stablecoins into fiat foreign money inside an affordable time frame, the paper stated.