Hong Kong has made an important step forward by revealing plans to regulate fiat-referenced stablecoins (FRS), a type of digital currency that is pegged to fiat currencies.
The announcement was made on December 27 by the Financial Services and Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA).
The regulatory bodies have invited public input on this proposal until February 29, 2024, and are accepting opinions and insights.
According to the proposed rules, any company intending to offer FRS in Hong Kong must obtain a special license from the HKMA.
To obtain this license, businesses must ensure that their stablecoins are fully backed by sufficient reserves and take measures to secure these reserves.
It is mandatory to share information regularly. Stablecoins that rely on algorithms to maintain their value, on the other hand, will be prohibited.
Furthermore, companies that issue stablecoins must have a physical presence in Hong Kong, including a principal officer and a team. This step is deemed necessary for effective risk management with stablecoins.
The Secretary for Financial Services and the Treasury, Christopher Hui, emphasized the significance of this move, saying, “With a new licensing system for virtual asset trading starting this June, regulating FRS is another big step in supporting Hong Kong’s growth in the Web3 technology field.”
This follows a December announcement by the HKMA and the Securities and Futures Commission (SFC) that they were ready to approve new types of digital asset funds.
These include VA Spot exchange-traded funds (ETFs), which broaden the scope beyond existing cryptocurrency funds.
Hong Kong’s regulatory landscape is evolving to embrace advancements in the digital asset space and foster an environment conducive to the growth of Web3 technologies.
