18/07/24

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On July 17, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) released the joint consultation conclusions for legislative proposal towards implementing regulatory regime for issuers of fiat-referenced stablecoin (FRS) in Hong Kong.

As virtual assets continue to become prevalent and evolve, there is a need to introduce a regulatory regime for such issuers to facilitate effective management of possible monetary and financial stability risks, and provide transparent and relevant guardrails, according to most respondents of the consultation.

In the words of the Secretary for Financial Services and the Treasury, Mr Christopher Hui, establishing a licensing regime for such issuers will provide more strength to Hong Kong’s virtual asset regulatory framework in line with global standards and ensure effective mitigation of potential financial stability risks related with the issuers’ activities.

The conclusions of the consultation revealed a general agreement with the proposed definition of stablecoin and broad consensus on the proposed exclusion of certain financial instruments based on the fundamental differences between stablecoins and those excluded items.

According to some respondents, there should be different regulations for stablecoins referencing a single currency and those referencing multiple currencies under the regulatory framework. A few respondents said the authorities should regulate stablecoins referencing assets other than fiat currencies such as physical commodities and precious metals.

Most respondents agreed with the regulatory regime prioritizing regulation of stablecoins issuance activity with a focus on addressing financial stability risks and enhancing protection for users because stablecoins have a higher potential of being used as a commonly acceptable means of payment.

Furthermore, most respondents agreed with the proposal to enact new legislation to implement the regulatory regime for stablecoin issuers, while some said they should address potential regulatory overlap or gaps between the proposed regulatory regime for stablecoin issuers and the VASP licensing regime.

The FSTB and the HKMA will consider respondents’ views and suggestions to finalize the legislative proposal to implement the regulatory regime, towards introducing a bill in the near term.