Hong Kong Regulators Propose Stricter Rules for Sale of Stablecoins to Retail Investors
Updated: Jan 3
In a move to strengthen regulations in the virtual asset industry, Hong Kong regulators are proposing tougher legislation that would require stablecoin issuers to obtain a license from the city's de facto central bank before serving retail customers.
The Hong Kong Monetary Authority (HKMA) aims to ensure that stablecoin issuers maintain a stable value with reference to one or more fiat currencies.
The proposed rules, outlined ina consultation paper launched by the HKMA in collaboration with the Financial Services and the Treasury Bureau (FSTB), state that companies without a license will be prohibited from issuing fiat-referenced stablecoins (FRS) in Hong Kong.
Additionally, they will not be allowed to issue stablecoins pegged to the value of the Hong Kong dollar or actively market their FRS to the Hong Kong public.
The move comes as Hong Kong strives to position itself as a leading hub for virtual assets and Web3 technologies. By implementing stricter regulations, the city aims to enhance investor protection and maintain the integrity of its financial system.
Stablecoins, which are digital currencies designed to maintain a stable value by being pegged to a fiat currency, have gained popularity in recent years. They offer the benefits of cryptocurrencies, such as fast and low-cost transactions, while minimising the volatility typically associated with other digital assets like Bitcoin.
However, concerns have been raised about the potential risks associated with stablecoins, including issues related to investor protection, money laundering and financial stability. The proposed licensing requirement for stablecoin issuers aims to address these concerns and ensure that retail investors are adequately safeguarded.
The consultation paper provides an opportunity for stakeholders to provide feedback and suggestions on the proposed regulations. The HKMA and FSTB will carefully consider the input received before finalising the rules.
Hong Kong regulators are proposing stricter rules that would require stablecoin issuers to obtain a license from the HKMA before serving retail customers.
The regulations aim to ensure that stablecoins maintain a stable value with reference to fiat currencies and enhance investor protection.
Companies without a license will be prohibited from issuing fiat-referenced stablecoins in Hong Kong and marketing them to the public.