The Hong Kong Monetary Authority has completed a public statement consultation on Stablecoin Regulations with the goal of introducing clear regulatory guidelines around the stablecoin market by the end of 2024.
Joseph Chan Ho-Lim, deputy director of the Hong Kong Office of Treasury and Financial Services, said that over the past five years, Hong Kong has become a growing destination for fintech companies. Chan added that the Hong Kong authorities are actively working to promote the Web 3 ecosystem with a focus on investor protection.
Hong Kong started its Stablecoin Regulation in January 2022 where the KHMA has shared a list of eight questions to seek policy-related recommendations and cited five possible regulatory outcomes: no action, acceptance regime, risk-based regime, blanket regime, and blanket ban. A year later the regulatory discussions completely prohibited the incorporation of the algorithmic stablecoin after the Terra-Luna debacle.
With the completion of the public consultation phase, the HKMA will focus on the areas of issuance, governance and stabilization.
This year alone, Hong Kong has taken the lead in crypto regulation at a time when most of its Western counterparts are still taking a cautious approach towards nascent technology. The HKMA has not only opened up cryptocurrency trading for retail traders, but has also initiated a licensing regime for cryptocurrency exchanges that requires these businesses to adhere to strict anti-money laundering regulations.
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In addition to Hong Kong, the US House Committee is also looking to introduce formidable regulations around the stablecoin market. The Committee of the US House of Representatives has filed three stablecoin bills in 2023 with the latter proposing key powers to the Federal Reserve with some power to state authorities to intervene.
The approach of local regulators in the two countries could not have been different. On the one hand, with Hong Kong regulators actively seeking to turn the country into a crypto hub, actions by US regulators could force many established companies to move, including stablecoin issuers. The US Securities and Exchange Commission accused several stablecoin issuers of violating securities law and filed a lawsuit against Binance and its affiliates. BUSD stablecoin issued by Paxos.
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