- The Hong Kong Monetary Authority has put together a discussion paper on crypto-assets and stablecoins.
- Regulators have revealed that Hong Kong will not allow algorithmic stablecoins.
The Hong Kong Monetary Authority (HKMA) has announced plans to regulate stablecoin issuers.according to Press release The regulator today announced that the entities operating stablecoin services Hong Kong You will need compulsory license.
Feedback from Ripple, Binance and Circle
the regulator is Presentation It is the result of reviewing feedback received from 58 submissions in response to discussion papers on cryptocurrencies and stablecoins. Binance, Circle, ripple labMatrixport, Animoca Brands, Symphony Digital.
The HKMA will focus on overseeing the governance, issuance and stabilization of fiat-backed stablecoins. Additionally, issuers must maintain reserves that match the amount of cryptocurrency in circulation. Reserves must be of high quality and liquidity, and the value of the assets must always match the value of the outstanding stablecoin.
HKMA Says No To Algorithmic Stable Coins
According to the HKMA, algorithmic stablecoins, i.e. those that derive value from arbitrage or algorithms, are unacceptable. The regulator intends to develop a comprehensive regulatory framework for stablecoins, with full backing and redemption as part of its core principles. This framework also limits companies from deviating from their core business. For example, wallet operators do not engage in lending activities.
Regulatory arrangements can be either new legislation or amendments to existing legislation. The government may implement it in 2023-24 after considering feedback, market developments and international discussions.
Regulatory scrutiny of stablecoin reserves has increased since the 2021 disclosure. Tethers [USDT] The largest reserve by market capitalization was unsecured short-term debt. The United States, the European Union, and Japan are also working to control the issuers of these coins.
HKMA Chief Executive Officer Eddie Yue said:
“A suitable regulatory environment will help address the financial stability risks that stablecoins may pose and promote the orderly and sustainable development of the industry.”
