HKMA and FSTB speak with on regulative program for stablecoin providers and reveal brand-new sandbox plan

On 27 December 2023, the Financial Solutions and the Treasury Bureau ( FSTB) and the Hong Kong Monetary Authority ( HKMA) collectively provided a public assessment paper on their legal proposition to control providers of stablecoin.

The Hong Kong Federal government has actually chosen that, due to the essential functions played by stablecoins in the Web3 and virtual possession environment and the growing interconnectedness in between the standard monetary system and virtual possession markets, a regulative program needs to be presented for fiat-referenced stablecoin ( FRS) providers. Monetary items and instruments that are currently controlled under existing regulative routines in Hong Kong, such as deposits, authorised funds, authorised structured items, float saved in saved worth centers and reserve bank digital currencies will be omitted from the proposed regulative program.

The proposed legislation follows an earlier round of assessment on cryptoassets and stablecoins by the HKMA which concluded in January 2023 (please see our previous upgrade). Secret elements of the proposition in today assessment paper consist of:

  • Presenting a brand-new piece of legislation to carry out a licensing program needing all FRS providers that satisfy any of the list below conditions to be certified by the HKMA, providers who: (i) release an FRS in Hong Kong; (ii) release an FRS referencing the Hong Kong dollar; or (iii) actively market their issuance of FRS to the Hong Kong public.
  • Offering that FRS can be used just by certified virtual possession trading platforms and certified corporations certified by the Securities and Futures Commission, HKMA-licensed FRS providers and HKMA-licensed banks (jointly, defined certified entities), and just FRS provided by HKMA-licensed providers can be used to retail financiers.
  • Forbiding the marketing of (i) FRS issuance by unlicensed entities, or (ii) non-specified certified entities’ offering of FRS.
  • Offering the required powers for the authorities to change the specifications of in-scope stablecoins and activities due to the fast advancement of the virtual possession market.

A transitional plan to assist in the execution of the regulative program.

The HKMA likewise prepares to present a sandbox plan for interacting supervisory expectations and assistance on compliance to entities having an authentic interest in, and an affordable intend on, providing FRS in Hong Kong. The sandbox plan will likewise allow those entities to offer their feedback on the proposed regulative requirements, with a view to helping with the subsequent execution of the regulative program and guaranteeing that it is suitabled for function. Information of the sandbox plan will be revealed individually.

The assessment is open till 29 February 2024.

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