With the growing popularity and usage of stablecoins, Hong Kong is working on its regulation. The Hong Kong Monetary Authority (HKMA) wants to address the issue of stablecoins in regards to payments, investor protection, and authorized institutions’ interface with crypto assets.
The regulator believes that stablecoins can become a commonly acceptable payments means. But it can fall readily into the existing financial legislative frameworks. As such, the Hong Kong regulator wants to scrutinize digital currencies. It wants to address the risks of financial stability and crimes associated with it before it spills into Hong Kong.
The former British colony had earlier proposed legislation for virtual asset service platforms (VASPs) to have licenses to operate. The Hong Kong Financial Services and Treasury Bureau, in May 2021, had published the Consultation Conclusions. It had outlined proposals to launch a licensing regime for VASPs. The HKMA highlighted five policy options for crypto assets.
Winston Ma, a managing partner of CloudTree Ventures, said there is a wide spectrum of possible outcomes for the crypto companies in Hong Kong that are after regulatory clarification. He opined that the regulator wants to control stablecoins similar to what has been achieved by China and US central banks.
Benjamin Quinlan, a CEO and managing partner at Quinlan and Associates, believes a blanket ban is unlikely in Hong Kong. He added that the market will not be unregulated for long. Quinlan said the authorities want to balance consumer protection and the broader financial stability. They also want stablecoins to manage and drive the monetary policy effectively without hampering innovation.
Eddie Yue, an executive at HKMA, feels its important to ensure that activities of payment-related stablecoins are safe and sound. The HKMA has been examining the need to amend the existing regulatory framework. It will ensure proper regulation of payment-related stablecoins in Hong Kong.