Hong Kong begins discussions to introduce stablecoin regulatory framework
Hong Kong's central banking institution, the Hong Kong Monetary Authority (HKMA), released a questionnaire to gauge public opinion on regulations for crypto-assets and stablecoins. The state-backed regulator intends to establish a regulatory framework by 2023-24.
HKMA’s “Discussion Paper on Crypto-assets and Stablecoins” highlights the explosive growth of the stablecoin market in terms of market capitalization since 2020 and the concurrent regulatory recommendations put forth by international regulators including the United States’ Financial Action Task Force (FATF), the Financial Stability Board (FSB) and The Basel Committee on Banking Supervision (BCBS).
According to the HKMA, the current size and trading activity of crypto-assets may not pose an immediate threat to the stability of the global financial system from a systemic point of view. However, the discussion paper warned:
Based on the above figure, HKMA’s paper shows that the global market capitalization stood at about $150 billion in December 2021, “representing about 5% of the overall crypto-asset market.” The regulator has also shared a list of eight questions to seek policy-related recommendations citing five possible regulatory outcomes — no action, opt-in regime, risk-based regime, catch-all regime and blanket ban:
HKMA expects stakeholders to submit their responses by 31st March 2022, and aims “to introduce the new regime no later than 2023/24.”
On an end note, the regulator stated that payment-related stablecoins have a higher potential for being incorporated into the mainstream financial system or even day-to-day commercial and economic activities.
As a result, the HKMA considers expanding the scope of the Payment Systems and Stored Value Facilities Ordinance
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