Hong Kong lawmaker raises concerns over proposed stablecoin regulations

Earlier today, Hong Kong’s fiscal regulators—the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA)—released a joint statement astir a caller regulatory model for stablecoins, a benignant of cryptocurrency designed to minimize the volatility of the price, typically tied to a reserve plus similar the U.S. dollar.

However, Hong Kong Legislative Council subordinate Johnny Ng has expressed concerns astir this regulatory connection successful a Dec. 27 station connected societal media level X (formerly Twitter).

Stablecoin regulation

Under the regulatory proposal, Hong Kong wants to oversee the activities of fiat-referenced stablecoins (FRS) and mandates issuers of these assets to get section licensing to operate.

The licence volition necessitate stablecoin issuers to backmost their assets fully, maintaining high-quality and highly liquid reserves with minimal risks. Furthermore, these reserves indispensable stay abstracted from the issuers’ different assets.

“The licensee would besides request to comply with applicable governance, hazard absorption and AML/CFT measures.  We besides mean to enactment successful spot indispensable guardrails for entities different than the stablecoin issuers who would similar to connection oregon administer stablecoins.  In particular, lone stablecoins issued by licensed issuers could beryllium offered to retail investors,” the regulators stated.

Additionally, the connection mandates that these firms found a section beingness wrong Hong Kong. This section entity should see a Chief Executive, elder absorption team, and cardinal unit based successful the country.

The connection invites nationalist feedback and contributions until February 29, 2024, and follows a anterior treatment insubstantial regarding stablecoins published by the HKMA successful 2022.

Meanwhile, these regulatory efforts further bespeak Hong Kong’s pro-crypto regulations designed to presumption it arsenic a crypto hub. Last week, CryptoSlate reported that Hong Kong’s Securities and Futures Commission (SFC) and HKMA revealed their readiness to judge applications for spot crypto exchange-traded funds (ETFs).

Concerns

In his statement connected X, Ng emphasized the value of regulators acknowledging the beingness of large planetary stablecoins similar Tether (USDT), USD Coin (USDC), etc., already successful circulation, perchance failing to question licensing.

According to him, if these planetary stablecoin companies bash not use for licenses successful Hong Kong, the regulatory authorities should research however specified coins could beryllium traded connected licensed exchanges.

He noted that a nonaccomplishment to code this could disrupt crypto transactions and trim trading volumes, starring to unintended repercussions successful the market.

Additionally, Ng highlighted concerns astir the policy’s ambiguity regarding stablecoin applications and imaginable transaction fees.

The station Hong Kong lawmaker raises concerns implicit projected stablecoin regulations appeared archetypal connected CryptoSlate.