Hong Kong plans stablecoin issuer licensing following positive consultation results with industry feedback.
Hong Kong’s financial authorities have disclosed the consultation conclusions on a licensing regime for stablecoin issuers as part of the region’s legislative proposal to regulate the industry.
In a joint statement, the Hong Kong Monetary Authority, the Financial Services and the Treasury Bureau, and the de facto central bank, the Hong Kong Monetary Authority, stated that the majority of respondents concurred that a regulatory regime should be implemented for fiat-referenced stablecoin issuers.
The HKMA and the FSTB reported that they received 108 submissions from professional institutions and industry participants during the two-month public consultation that concluded in February.
One of the primary components of the proposal is the requirement for all FRS issuers to acquire a license from the HKMA.
“We will evaluate the FRS issuer’s place of incorporation, the location of its operations, the provision of subsequent customer service to FRS users, and the use of a Hong Kong bank account to process issuance and redemption requests,” the regulator stated in the conclusions report.
Additionally, certain respondents inquired about the regulatory regime’s ability to encompass FRS issuance.
The conclusions report stated that the HKMA will consider a variety of factors when determining whether an individual is “actively marketing” an issuance of FRS to the Hong Kong public.
These factors include the language used in marketing messages, the target audience, and the domain name in use.
Additionally, there have been some reservations regarding the necessity of maintaining complete support at all times.
The regulators responded that the quantity of FRS issued “must always be fully backed by reserve assets at any given point in time,” as a run on those FRS could potentially occur due to insufficient reserve assets, thereby affecting confidence in the ecosystem.
The statement indicates that the regulators will expedite the process of finalizing the legislative proposition and introducing a bill to the Legislative Council.
The anticipated proposal serves as a follow-up to the HKMA’s March announcement of a sandbox for stablecoin issuers, which was intended to facilitate the development of future pertinent regulations.
The HKMA is in the process of reviewing the applications for the sandbox and anticipates that the list of participants will be disclosed in the near future.
In March, Vincent Chok, CEO of First Digital, the company that issued the FDUSD stablecoin, informed The Block that the company perceived a “good” market demand. “We are aware that a significant number of individuals are preparing to submit applications for the Hong Kong stablecoin licensing,” he stated.
