Hong Kong regulators propose tougher rules for sale of stablecoins to retail investors
Hong Kong's regulatory bodies are suggesting stricter laws for the sale of stablecoins to retail investors. These laws would require stablecoin issuers to obtain a licence from the Hong Kong Monetary Authority (HKMA), the city's central bank, before they can serve retail customers. This proposal is part of Hong Kong's ongoing efforts to establish a robust regulatory framework for the virtual-asset industry.
According to a consultation paper released by the HKMA and the Financial Services and the Treasury Bureau (FSTB), issuers of stablecoins, which are designed to maintain a stable value relative to one or more fiat currencies, will need to be licensed by the HKMA if they wish to sell to retail investors in Hong Kong. Companies without a licence will be prohibited from issuing fiat-referenced stablecoins (FRS) in Hong Kong, issuing a stablecoin pegged to the Hong Kong dollar, or actively marketing their FRS to the Hong Kong public.
This legislative proposal comes as Hong Kong is intensifying its efforts to become a hub for virtual assets and Web3, while implementing safeguards for the volatile sector, which has witnessed several cryptocurrency firm collapses over the past two years. The paper also refers to the collapse of TerraUSD, an algorithmic stablecoin pegged to the US dollar, in 2022, highlighting the urgency of implementing such a regulatory regime. Under the proposed regime, FRS issuers will need to meet a wide range of requirements, including ensuring that the value of their reserve assets is at least equal to the par value of the stablecoin in circulation at all times, and establishing segregated accounts for reserve assets.
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"Hong Kong's rule-makers want to make it harder for companies to sell a type of digital money called stablecoins to regular people."
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