Hong Kong Announces Plans to Regulate Fiat-Referenced Stablecoins

Hong Kong recently made an important announcement, they plan to accept and regulate fiat-referenced stablecoins (FRS), a type of digital currency. The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) released this report on December 27.

They are allowing the public to share their thoughts on this plan from now till February 29, 2024. According to the new rules, any company that wants to offer FRS in Hong Kong must get a special license from the HKMA. To get this license, companies must ensure their stablecoins are fully backed with enough reserves and make sure that these reserves are kept safe and separate. They also need to share information regularly. However, stablecoins that use algorithms to maintain their value won't be allowed.

Companies that issue stablecoins must have an office in Hong Kong with a main leader and a team. This step is important to manage the risks of stablecoins.

Christopher Hui, the Secretary for Financial Services and the Treasury mentioned, “With a new licensing system starting this June for virtual asset trading, regulating FRS is another big step in supporting Hong Kong's growth in the Web3 technology field.”

In December, the HKMA and the Securities and Futures Commission (SFC) also mentioned their willingness to approve new types of digital asset funds, including Virtual Asset Spot exchange-traded funds (VA Spot ETFs), in addition to the existing cryptocurrency funds.