- Hong Kong’s financial regulators have proposed new rules requiring stablecoin issuers to obtain local licenses. The rules aim to increase oversight and position Hong Kong as a crypto hub.
- Legislator Johnny Ng raised concerns that major international stablecoins may not seek Hong Kong licenses, which could disrupt crypto trading and volumes in Hong Kong.
- Ng suggested allowing licensed exchanges to still trade unlicensed stablecoins. He also highlighted ambiguity around fees and applications under the new policy.
The Hong Kong government has proposed new regulations for stablecoins. However, some lawmakers have raised concerns about the potential impact.
Regulators Seek Local Licensing
Earlier this week, Hong Kong’s financial regulators released a discussion outlining a new framework to oversee fiat-referenced stablecoins (FRS). Under the proposal, issuers would be required to obtain a local license to operate.
Licensing would mandate that issuers fully back assets, maintain high-quality reserves separate from other assets, and comply with governance, risk management and anti-money laundering rules. Firms would also need to establish a local presence in Hong Kong.
The proposal follows an earlier discussion paper on stablecoins. It aims to position Hong Kong as a crypto hub, amid wider efforts to promote crypto innovation.
Lawmaker Flags International Stablecoins
But legislative council member Johnny Ng has raised concerns about major global stablecoins like Tether and USD Coin. He notes many are already in circulation but may not seek Hong Kong licensing.
Ng argues that if international issuers don’t apply, regulators should allow licensed exchanges to trade unlicensed stablecoins. Otherwise, crypto transactions could be disrupted, reducing trading volumes with unintended consequences.
He also highlights ambiguity around potential stablecoin applications and fees under the new policy for Hong Kong.
The proposal is open for public feedback until February 2024. Lawmakers hope to address concerns before finalizing regulations.
