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- Hong Kong is going to request the necessary licensing for stablecoin providers.
- Bodies carrying on regulated activity in Hong Kong will have to get a license to carry out stablecoin services.
- Big economies like the United States, the European Union, and Japan also are in work on authority for stablecoin issuers.
Hong Kong is ready to request necessary licensing for stablecoin providers and will not permit algorithmic stablecoins, its prime financial regulator revealed on January 31. Bodies carrying on regulated activity in Hong Kong will have to get a license to carry out stablecoin services.
The Hong Kong Monetary Authority (HKMA) planned out its regulatory plans after getting feedback on a dialogue paper published in 2022. Set up on the 58 responses it got, the regulator revealed it will establish a regime to guide stablecoins, which are cryptocurrencies whose worth is pegged to other assets.
HKMA Plans
To initiate with, the HKMA plans to oversee the law, issuance, and balance of fiat-backed stablecoins, for which the issuer must keep reserves of the same amount of the crypto in motion. Stablecoin reserves have eventually fallen under tight regulatory inspection over the world since 2021 when the issuer of the prime stablecoin as per the market capitalization, Tether, disclosed more of its USDT reserves were created of unsecured short-term debt. Big economies like the United States, the European Union, and Japan also are in work on authority for stablecoin issuers.
“The worth of the reserves assets of a stablecoin deal must meet the worth of an amazing stablecoin around the clock,” the report revealed. “The reserve assets should be high in quality as well as liquidity. Stablecoins that get their value grounded on an arbitrage, as well as the algorithm, will not be acknowledged.”
TerraUSD, an algorithmic stablecoin whose worth was hypothesized to be preserved by another crypto asset, Luna, crashed in May 2022.
“In making a particular regulatory positioning, the HKMA will acknowledge the feedback got, newest market advancement along with international discussion. We will also interact with stakeholders as well as market members. We anticipate executing the regulatory positioning in this year or maximum to the next,” the Chief Executive Eddie Yue of the Hong Kong Monetary Authority stated in a press statement.
Hong Kong has so far issued $10 billion in green bonds in various currencies, adding the U.S. dollar, euro, and renminbi.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
