Reading 2 minutes Views 2 Published Updated
The Hong Kong Monetary Authority has completed a public consultation on stablecoin regulation with the goal of establishing clear regulatory rules for the stablecoin market by the end of 2024.
Joseph Chang Ho-Lim, Deputy Director of the Hong Kong Bureau of Financial Services and Treasury, said Hong Kong has become a growing destination for fintech companies over the past five years. Chan added that the Hong Kong authorities are actively working to promote the Web 3 ecosystem, with a focus on protecting investors.
Hong Kong launched its stablecoin regulations in January 2022 when the KHMA shared a list of eight questions for policy advice and mentioned five possible regulatory outcomes – no action, consent mode, risk-based mode, all-inclusive mode. ban. A year later, regulators outright banned the inclusion of an algorithmic stablecoin following the Terra-Luna fiasco.
After the completion of the public consultation phase, the HKMA will focus on emissions, management and stabilization issues.
Just this year, Hong Kong has taken the lead in regulating cryptocurrencies while most of its Western counterparts are still cautious about the nascent technology. The HKMA has not only opened cryptocurrency trading to retail traders, but has also introduced a licensing regime for cryptocurrency exchanges that requires these businesses to comply with strict anti-money laundering regulations.
Related: Stablecoins are the solution to the banking problem of cryptocurrencies, says chief executive
In addition to Hong Kong, the US House of Representatives committee is also seeking to introduce serious rules in the stablecoin market. In 2023, a committee of the US House of Representatives submitted three draft stablecoin bills, the latest of which proposes key powers for the Federal Reserve, with some power for government intervention.
The approach of local regulators in the two countries could not be different. On the one hand, Hong Kong regulators are actively seeking to turn the country into a cryptocurrency hub, the actions of US regulators could force many established businesses to leave, including stablecoin issuers. The US Securities and Exchange Commission accused several stablecoin issuers of violating securities laws and filed a lawsuit against Binance and its Paxos-issued stablecoin BUSD.