Under the proposed regulations, companies issuing fiat-backed stablecoins would be required to obtain a license from the HKMA in order to legally sell tokens to residents of Hong Kong. To be eligible for a license, issuers must hold sufficient reserves to fully back the face value of their stablecoins. They must also maintain separation between their own funds and client funds, provide comprehensive information to users, and regularly submit detailed reports to regulators. Additionally, issuers must establish an office in Hong Kong, have a CEO, a management team, and key personnel for the project.
The proposed regulations explicitly state that companies issuing algorithmic stablecoins will not be eligible for a license.
Public consultation on these proposals will be open until February 29, 2024.
Hong Kong Finance Minister Christopher Hui stated, “Compulsory licensing will help manage the risks associated with the development of stablecoins. This will be an important measure to promote the development of the Web3 ecosystem in Hong Kong.”
In a related development, the Securities and Futures Commission (SFC) of Hong Kong and the Central Bank of Hong Kong have expressed their willingness to consider the possibility of launching cryptocurrency exchange-traded funds (ETFs) in the region.