Hong Kong Solicits Comment on New Stablecoin Legislation

10 months ago 6

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The Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) have released a consultation paper on new stablecoin legislation. The paper will be used to draft a licensing regime for stablecoin issuers following similar efforts in Singapore that have benefitted USDC issuer Circle.

The government seeks input on the conditions under which it should issue a license. Only licensed entities can market products to retail investors.

Hong Kong Proposes Stablecoin Sandbox

The new paper follows engagements with stakeholders after the release of the Discussion Paper on Crypto-Assets and Stablecoin by the HKMA last year. The latest paper discusses prohibitions on advertisements of unlicensed products and how governments can amend legislation quickly. It also proposes a transitionary phase until the government implements the stablecoin legislation.

The government will also launch a sandbox to issue guidance and solicit feedback from interested issuers. It will provide details of the sandbox in a separate announcement, said Christopher Hui, the Secretary for Financial Services and Treasury.

In June, the Hong Kong government promulgated a new licensing regime for crypto exchanges. The regime addressed custody rules for crypto businesses and which assets they could offer to the public.

At the time, crypto industry participants welcomed the regime’s clarity but criticized its strictness. Hong Kong has also sought to attract business activity under the broader “Web3” description. It arguably led to crypto’s migration to Asia amid falling volumes at major exchanges in 2023.

Recent Developments in Stablecoin Laws

Hong Kong’s legislation is the latest effort to bridge the world’s crypto and fiat rails. Following Singapore’s new legislation, stablecoin issuer Circle acquired a payment institution license that allows some users to hold USDC.

Upcoming Markets-in-Crypto-Assets legislation in Europe has seen French banking giant Societe Generale issue a euro-backed stablecoin. Circle also recently added its EURC stablecoin to Solana as European regulations growing increasingly clear. USDC, its other coin, faces challenges in the US from a lack of regulatory clarity.

This week, Circle, US exchange Coinbase, and venture firm a16z were revealed to have invested in a crypto political action committee to lobby for clearer US rules. Senator Patrick McHenry, a key figure in advancing a stablecoin bill through Congress this year, has announced that he will not re-run during the 2024 elections.

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