Hong Kong Regulators Introduce Mandatory Licensing for Stablecoin Issuers Amid Concerns

By: Eva Baxter

Hong Kong's financial regulators, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), have released a joint statement about a new regulatory framework for stablecoins, cryptocurrencies designed to minimize the volatility of their price. Yet, Hong Kong Legislative Council member Johnny Ng showed his concerns about this proposal on a social media platform.

According to the proposal, the HKMA would oversee activities of fiat-referenced stablecoins (FRSs). The issuers of these assets would need to obtain local licensing to operate and would have to back their assets fully, maintaining high-quality and highly liquid reserves. The proposal also mandates a local presence in Hong Kong for these firms. The proposal is open for public input and contributions until February 29, 2024.

However, Ng has voiced concerns regarding failings of global stablecoins to seek licensing and the ambiguity of the policy regarding stablecoin applications and potential transaction fees. He warned of the repercussions in the market if international stablecoin companies do not apply for licenses and how their coins could be traded on licensed exchanges.

The regulatory moves are part of Hong Kong's broader efforts to introduce pro-crypto regulations and establish itself as a crypto hub.