Hong Kong Financial Services and the Treasury Bureau: Soon to publish the consultation summary on the proposed regulatory framework for stablecoin issuers

ChainCatcher news, the Hong Kong Financial Services and the Treasury Bureau stated that following the implementation of the licensing system for virtual asset service providers in June last year, the Treasury Bureau and the Monetary Authority consulted the public at the end of last year regarding the proposed regulatory regime for Hong Kong stablecoin issuers, and will soon publish a consultation summary to prepare a bill for the Legislative Council's review.

The Treasury Bureau pointed out that it hopes to establish a regulatory system for fiat-backed stablecoin issuers that is appropriate and in line with international regulatory recommendations, which can provide sufficient protection for fiat-backed stablecoin users and address the potential risks that fiat-backed stablecoins pose to monetary and financial stability, allowing Hong Kong's virtual asset ecosystem to develop sustainably and responsibly.

Given the important role of fiat-backed stablecoins in the Web3 and virtual asset ecosystem, and the increasingly close connection between the traditional financial system and the virtual asset market, the government needs to establish a regulatory framework for fiat-backed stablecoin issuers. The main requirements include: reserve management and stabilization mechanisms, including requiring issuers to ensure that fiat-backed stablecoins are fully backed by high-quality and highly liquid reserve assets; redemption requirements; as well as governance, knowledge, and experience regulatory requirements.

At the same time, to protect fiat-backed stablecoin users, it is recommended that only the following entities can sell fiat-backed stablecoins in Hong Kong or actively promote related services to the public in Hong Kong: licensed fiat-backed stablecoin issuers; recognized institutions (i.e., banks); licensed corporations; and licensed virtual asset trading platforms. For existing stablecoin issuers, the proposed regulatory system will also have corresponding transitional arrangements.