Hong Kong’s financial regulators said they have concluded a consultation period over a licensing program initiative for fiat-referenced stablecoin (FRS) providers.
The consultation, which ended in February, received 108 submissions from various stakeholders, including market participants, industry associations, and professional organizations.
The Monetary Authority (HKMA) and the Financial Services and Treasury Bureau (FSTB) announced this development in a joint statement on July 17.
Stablecoin licensing regime
The regulators stated most respondents agreed that a regulatory regime for FRS issuers was necessary, considering the rapid rise of drastic digital assets in recent years. They believe this will manage potential monetary and financial stability risks and ensure transparent and suitable safeguards.
Furthermore, most respondents also supported the proposed regulatory requirements and implementation arrangements required by these stablecoin issuers. The regulators wrote:
“FRS, as compared to other types of stablecoins (e.g. commodity-linked or precious metal-linked stablecoins), is considered as having greater potential to be developed as a commonly acceptable means of payment and hence poses higher and more imminent monetary and financial stability risks.”
Christopher Hui, FSTB Secretary, noted that the licensing regime would bolster Hong Kong’s digital asset framework. He also emphasized that it aligns with international standards, promotes financial stability, and mitigates losses.
The financial regulators said they will consider all the feedback in finalizing the legislative proposal for the regulatory regime and aim to introduce a bill to the Legislative Council soon.
This announcement follows the launch of Hong Kong’s stablecoin regulatory sandbox program in March. HKMA is processing applications for the sandbox, and the list of participants will be announced soon.
Meanwhile, these efforts reflect Hong Kong’s bid to become a hub for crypto innovation. Hong Kong remains one of the few regions focused on regulating the crypto industry, making it a favorable destination for industry participants.
