Hong Kong begins discussions to introduce stablecoin regulatory framework

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Hong Kong’s central banking establishment, the Hong Kong Financial Authority (HKMA), launched a questionnaire to gauge public opinion on rules for crypto-assets and stablecoins. The state-backed regulator intends to ascertain a regulatory framework by 2023-24.

HKMA’s “Dialogue Paper on Crypto-assets and Stablecoins” highlights the explosive development of the stablecoin market when it comes to market capitalization since 2020 and the concurrent regulatory suggestions put forth by worldwide regulators together with the USA’ Monetary Motion Activity Power (FATF), the Monetary Stability Board (FSB) and The Basel Committee on Banking Supervision (BCBS).

Market Capitalization of Crypto-assets. Supply: HKMA

Based on the HKMA, the present dimension and buying and selling exercise of crypto-assets might not pose a direct menace to the steadiness of the worldwide monetary system from a systemic viewpoint. Nevertheless, the dialogue paper warned:

“The rising publicity of institutional traders to such property as a substitute for or to enrich conventional asset courses for buying and selling, lending and borrowing […] point out rising interconnectedness with the mainstream monetary system.”

Market Capitalization of Main Stablecoins. Supply: HKMA.

Primarily based on the above determine, HKMA’s paper exhibits that the worldwide market capitalization stood at about $150 billion in December 2021, “representing about 5% of the general crypto-asset market.” The regulator has additionally shared a listing of eight questions to hunt policy-related suggestions citing 5 attainable regulatory outcomes — no motion, opt-in regime, risk-based regime, catch-all regime and blanket ban:

Doable coverage choices for regulating crypto-assets. Supply: HKMA.

HKMA expects stakeholders to submit their responses by thirty first March 2022, and goals “to introduce the brand new regime no later than 2023/24.”

Main jurisdictions’ regulatory stance in the direction of stablecoins. Supply: HKMA.

On an finish observe, the regulator said that payment-related stablecoins have a better potential for being integrated into the mainstream monetary system and even day-to-day industrial and financial actions. 

In consequence, the HKMA considers increasing the scope of the Fee Techniques and Saved Worth Services Ordinance (PSSVFO), a legislation that determines the legality of monetary merchandise. 

Associated: Hong Kong actual property big leads $90M elevate for crypto financial institution Sygnum

Complementing the native authorities’s pro-crypto intentions, one in all Hong Kong’s largest property builders Solar Hung Kai invested $90 million in Sygnum, a Swiss financial institution devoted to digital asset holding.

As Cointelegraph reported, the Sequence B funding spherical brings Sygnum’s post-money valuation to $800 million, marking a tenfold surge in consolidated revenues from 2021.