The Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB) jointly issued a public consultation document on stablecoins today.

Prior to this consultation, the HKMA had issued a Discussion Paper on Crypto-assets and Stablecoins in January 2022, inviting feedback from various stakeholders.

The subsequent Conclusion Paper in January 2023 reflected the views of 58 respondents from the industry, public bodies, business and professional organizations, and individuals.

Respondents generally expressed support for the HKMA's proposal to regulate stablecoins, as outlined in the Discussion Paper.

Submitting Your Feedback

The FSTB and the HKMA are welcoming written comments until February 29, 2024, through designated channels.

According to the paper, the proposal for a regulatory regime gained broad support, especially after the 2022 TerraUSD collapse emphasised the urgency of such regulation.

This is also likely because there was a lack of clear directives addressing cryptocurrency.

The objectives of the proposed regime include addressing potential monetary and financial stability risks, providing protection to stablecoin users, maintaining Hong Kong's status as an international financial center, and promoting sustainable development of the virtual asset (VA) ecosystem.

Increased Interest in Stablecoins

Yanlin Guo, co-founder of virtual insurance provider OneDegree, noted that there has been in significant uptake in interest from over 100 project teams in developing stablecoins.

Use cases range from payments, cross-border trade financing, equity and debt capital markets, decentralised finance (DeFi), to GameFi.

Some projects also expressed interest in applying for a virtual asset service provider (VASP) license in Hong Kong.

OneDegree believes that with increased use cases and mainstream acceptance of regulated stablecoins, virtual asset exchanges, custodians, and asset management companies will experience higher trading volumes and capital flow.

Guo suggests raising the upper limit of investor protection for warm wallets and hot wallets.