The Hong Kong financial regulator, the Financial Services and the Treasury Bureau (FSTB) announced earlier today that the outcome of the stablecoin consultation held in December 2023 regarding stablecoin issuers will be out today. This move is an essential step in the region’s plan to regulate the crypto laws in the industry.
The regulatory agency has been gearing up to create a legislative bill in the region for a while now. It hinted that once this proposed bill is ready, it will be submitted to the Legislative Council immediately. According to the statement released, FSTB recommended specific entities be allowed to offer fiat-referenced stablecoins to retail users in the region. These entities include
licensed stablecoin issuers and authorized institutions like banks. In addition to the list are licensed corporations and licensed crypto trading platforms
To validate the proposal, it was outlined in the statement that purposely to establish regulations governing stablecoin issuers in areas such as reserve management, stability mechanisms, redemption, and governance, as outlined in the statement. This news came after the Spot Bitcoin ETF garnered massive netflow in the region.
Before now, Hong Kong had no dedicated statutory framework for regulating stablecoins. This prompted the consultation held in 2023 regarding crypto-assets and stablecoins in the region. During the consultation, regulators suggested that all stablecoin issuers linked to fiat currencies should acquire a license from the Hong Kong Monetary Authority, which collaborated on the stablecoin consultation.
Crypto enthusiasts in the region are speculating that Hong Kong will likely mandate that fiat-referenced stablecoins must be fully backed and redeemable at par to the proposals put forth by Singapore, another prominent financial center in Asia. Notably, the Crypto Council
During the consultation for stablecoin regulation, the Crypto Council for Innovation (CCI) made a strong statement and expressed its views. It highlighted potential burdens for global crypto businesses due to these strict rules. It proposed that the regulatory agency should consider a risk-based method similar to Japan’s license approach.
In line with the discussion, CoinRise media reported recently that Hong Kong is taking a measured approach to the regulation of cryptocurrencies, a move to review the crypto rules in the region.
Following the proposal was the launch of a sandbox for stablecoin issuer in March. The Hong Kong Monetary Authority (HKMA) revealed that this exploit is to lay groundwork for future regulations.
This development could help develop suitable risk-based regulations pivotal for promoting sustainable and responsible growth in the stablecoin sector, Eddie Yue, HKMA’s Chief executive mentioned. Market experts like Vincent Chok, issuer of FDUSD stablecoin has signal interest to secure the Hong Kong stablecoin license once approved.
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