Hong Kong Proposes Licensing Requirement for Stablecoin Issuers
Date: 2024-03-02 Author: Dima Zakharov Categories: IN WORLD
Hong Kong Proposes Licensing for Stablecoin Issuers
Hong Kong authorities have unveiled a proposal to regulate stablecoins pegged to fiat currencies, notably the US dollar. The proposal, put forth by the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), aims to introduce a licensing framework for stablecoin issuers operating within the region.
Consultation Period and Licensing Criteria
The consultation period for the proposal extends until February 29, 2024. According to the draft legislation, stablecoin issuers actively engaging in the issuance of fiat-backed stablecoins to the Hong Kong public will be required to obtain a license from the HKMA.
The criteria for obtaining an HKMA license will encompass full backing of circulating stablecoins with reserves at least equivalent to their nominal value, segregation and custody of reserve assets, disclosure requirements, and regular reporting. Notably, algorithmic stablecoins will not be eligible for licensing under this framework.
Operational Requirements
Additionally, stablecoin issuers will be mandated to establish a registered office in Hong Kong, complete with a chief executive officer, senior management team, and key personnel.
Christopher Hui, the Secretary for Financial Services and the Treasury, emphasized the necessity of appropriate licensing to manage the risks associated with stablecoin development. He highlighted this proposal as another crucial step towards fostering the Web3 ecosystem in Hong Kong, following the licensing regime introduced for virtual asset trading platforms in June.
Industry Reception
The proposal has received a warm reception from industry players, with Ronald Yu, CEO of ZA Bank, one of Hong Kong's largest virtual banks, expressing enthusiastic support. Yu anticipates that the regulatory framework will bolster the industry's future regulatory foundation, enhancing security and fostering growth.
