HKMA and FSTB Set to Implement Licensing Regime for Fiat-Referenced Stablecoins in Hong Kong

Hong Kong’s Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), are set to finalise plans for a new licensing regime for fiat-referenced stablecoins (FRS), to combat associated financial stability risks. On 17 July, the two regulatory bodies jointly issued the conclusion of their legislative proposal to implement a regulatory regime for FRS issuers in Hong Kong. A two-month public consultation, which concluded in February, saw 108 submissions from market participants, industry associations, business and professional organisations and other stakeholders. HKMA and FSTB revealed that the majority of respondents agreed that, in line with the increased prevalence and evolving development of virtual assets (VAs), a regulatory regime should be introduced for FRS issuers, to facilitate proper management of the potential monetary and financial stability risks, while providing transparent and suitable guardrails. The proposed regulatory requirements and implementation arrangements received general support from respondents, with some further enhancements suggested in the submissions. Eddie Yue, chief executive of the HKMA, said: “We are grateful for the respondents’ valuable comments and are encouraged by the general support for the proposed regulatory regime. We believe that a well-regulated environment is conducive to the sustainable and responsible development of the stablecoin ecosystem in Hong Kong.”

Stablecoins in Hong Kong

The FSTB and the HKMA will take into account the views and suggestions from respondents in finalising the legislative proposal for implementing the regulatory regime, with a view to introducing a bill into the Legislative Council as soon as possible. Christopher Hui, secretary for the FSTB, also commented: “In addition to the existing regulatory regime for VA trading platforms, the establishment of a licensing regime for FRS issuers will further strengthen the VA regulatory framework in Hong Kong in line with international standards and effectively mitigate possible financial stability risks associated with FRS issuance activities.” The HKMA is also processing the applications for the stablecoin issuer sandbox, with the list of sandbox participants to be announced shortly.