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Hong Kong Proposes Comprehensive Stablecoin Regulations

Hong Kong regulators have proposed new stablecoin regulations that would require issuers to obtain local licenses, manage risks, and combat money laundering.

Key Takeaways

  • Stablecoin issuers will need to obtain Hong Kong-based licenses under the proposed rules issued by the FSTB and HKMA.
  • Only licensed entities will be allowed to offer stablecoins to retail investors in Hong Kong.
  • Licensed firms must maintain segregated reserves and follow governance and risk management standards.

Stringent Requirements for Issuers

The proposed rules, issued by Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and Hong Kong Monetary Authority (HKMA), will require stablecoin issuers to:

  • Obtain a local license to issue stablecoins in Hong Kong
  • Maintain segregated, high-quality reserves to back their stablecoins
  • Comply with governance, risk management, and anti-money laundering/counter-terrorist financing (AML/CFT) standards
  • Have a Hong Kong-based leadership team

Concerns Over Impact on Existing Stablecoins

Hong Kong lawmaker Johnny Ng raised concerns via Twitter that major international stablecoins like Tether (USDT) and USD Coin (USDC) already circulate in Hong Kong without local licenses. He worries this could impact trading volumes and transactions.

Efforts to Make Hong Kong a Crypto Hub

The proposed regulations reflect Hong Kong’s proactive approach to integrating cryptocurrencies. Last week, Hong Kong regulators also signaled they would approve spot crypto ETFs. In August, Hong Kong issued its first VASP licenses.

However, experts note challenges in balancing regulation, risk management, and innovation – setting a precedent for other jurisdictions considering stablecoin policies.

The public has until February 29, 2024 to provide feedback on the proposal.


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