Hong Kong is seeking the public’s opinion on a new legislative proposal to regulate stablecoins and the issuers of these fiat-backed crypto assets.
On Wednesday, the city’s Financial Services and Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) jointly launched a public consultation paper to gather feedback on the government’s plan to introduce licensing requirements for stablecoin issuers (FRS ) with fiat reference.
The proposed legislation aims, among other things, to require FRS issuers to meet certain conditions and obtain a license before they can offer Hong Kong dollar-referenced stablecoins or issue an FRS in the jurisdiction. It also aims to allow the Monetary Authority to give the green light to stablecoins before these assets can be offered to retail investors.
If approved, the proposed regulatory regime will also prohibit the advertising of FRS issued by unlicensed entities and stablecoin offerings by unspecified licensed entities.
The government says the bill stems from the important role that stablecoins play in the web3 and virtual asset (VA) ecosystem and the increasing connection between the traditional financial system and the VA market.
“Bringing FRS issuers under the supervisory remit based on a risk-based and flexible approach will facilitate proper management of the potential monetary and financial stability risks and provide transparent and appropriate guardrails against the increased prevalence of VAs.”
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