Hong Kong is asking for the public’s opinion on a new legislative proposal to regulate stablecoins and the issuers of these fiat-backed crypto assets.
On Wednesday, the city’s Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) jointly launched a public consultation paper to gather feedback on the government’s plan to introduce licensing requirements for fiat-referenced stablecoin (FRS) issuers.
The proposed legislation seeks, among others, to require FRS issuers to meet certain conditions and obtain a license before they can offer Hong Kong dollar-referenced stablecoins or issue an FRS in the jurisdiction. It also aims to empower the Monetary Authority to give the green light to stablecoins before these assets can be offered to retail investors.
If approved, the proposed regulatory regime will likewise prohibit the advertising of FRS issued by unlicensed entities and stablecoin offerings by non-specified licensed entities.
The government says the legislative proposal arises from the important role that stablecoins play in the web3 and virtual asset (VA) ecosystem and the rising connection between the traditional financial system and the VA market.
“Bringing FRS issuers into the regulatory remit under a risk-based and agile approach will facilitate a proper management of the potential monetary and financial stability risks, and provide transparent and suitable guardrails with the increased prevalence of VAs.”
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