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- 1 Being a crypto friendly region Hong Kong has also implemented certain rules regarding stablecoins.
- 2 Full regulatory framework will come into effect till the end of 2024.
Hong Kong is stepping up as a major crypto hub. With the imposition of some tough regulations on digital assets in European countries the exchanges are seeking banking partners worldwide. The region is offering a warm welcome to crypto ventures with some rules to regulate the crypto activities in the region.
Hong Kong Monetary Fund (HKMA) are looking for comments from the public concerning stablecoin and to introduce the regulatory framework by the end of 2024.
After the collapse of FTX and TerraUSD, the U.S. government is executing tougher regulations on the crypto industry. China is also signaling the rules implementation in Hong Kong referring to the developing digital assets sector.
Stablecoin Regulations Concern In G20 Countries
Developing economies in the G20 are worried about the varied use of stablecoins and consider it as a threat to their monetary policy. Advanced economies raised the concern of a regulatory framework for stablecoins which are tied with the value of other assets like fiat currency. Whereas, the emerging economies need a complete prohibition on stablecoin usage.
The Financial Stability Board (FSB) permitted the flexible rules implementation by the countries. Regulators can make rules regarding the particular needs of their country, as told by Joseph Chan who is Undersecretary for Financial Services and the Treasury.
From June 1st, Hong Kong has officially started a new regulatory rule which is mandatory for the crypto exchanges. The firms should have registration to work in the region. In other words, only the license exchanges are allowed to retail investors to trade on major cryptocurrencies. Bitcoin and Ether are the expected major digital currencies.
This rule is the major turning point for the industry. The Hong Kong government is providing regulatory clarity on the crypto industry which is accepted by the digital currency sector with open arms. This will give consistency to economic growth.
Hong Kong’s Stance On Stablecoins
The HKMA has issued a discussion paper in 2022 January regarding stablecoin and digital assets. Further in January 2023, released the discussion paper concluding that it can take the risk based and quick approach in regulating the stablecoins.
The rules proposed in the discussion paper can be subject to change but it gives the outlook of the regulation on stablecoin and the stance of the Hong Kong government regarding the crypto industry.
The mentioned rules suggested that stablecoins must be backed with high liquidity assets or fiat currency. Algorithmic stablecoins will not be accepted. It also clarifies that stablecoins can be redeemed into fiat currency within a reasonable period.
HKMA is also working on developing the regulatory framework and suggestions on stablecoins with FSB. It is an international body that monitors and makes recommendations concerning the global financial system.
Hong Kong is selecting the perfect regulatory framework according to the priorities of the region. Also, it is maintaining a crypto friendly nature towards the exchanges for growth and stability of the financial sector.
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.
