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Hong Kong must regulate the sale of stablecoin to ensure the city's virtual asset ecosystem develops in a responsible manner, an official said on Wednesday, as a public consultation exercise on a legislative proposal for such a move got underway.
The Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau want a new law to require issuers to obtain a licence in order to be allowed to sell stablecoins to investors.
It would also be illegal for unlicensed entities to advertise stablecoins, which are a
type of cryptocurrency designed to maintain a stable value by being linked to another asset class.
Secretary for Financial Services and the Treasury Christopher Hui said a regulatory regime would ensure that the development of stablecoins in Hong Kong aligns with international standards.
"With the implementation of the licensing regime for VA (virtual assets) trading platforms from June this year, the legislative proposal to regulate FRS (fiat-referenced stablecoin) is another important measure facilitating Web3 ecosystem development in Hong Kong," he said.
HKMA chief Eddie Yue, meanwhile, said a regulatory regime and standards on stablecoins are essential to support the sustainable and responsible development of the virtual asset ecosystem in Hong Kong.
The chairman of the Hong Kong FinTech Association, Neil Tan, welcomed the proposal, saying regulating stablecoins will establish a strong base for Hong Kong to become a global crypto hub.
"It's also a way to build trust and confidence inside of the marketplaces, because there are a number of requirements inside the regulation, whether you are talking about capital requirement, whether you're talking about risk management, process procedures, investor protection measures, so on and so forth, that need to be introduced before people can start issuing this type of stablecoin," Tan explained.
Meanwhile, the co-chair of the Hong Kong Digital Finance Association, Emil Chan, urged the government to bring in rules for stablecoins as soon as possible to avoid causing confusion in the market.
"If it is not implemented timely, there will be a very negative effect. We are going to lose this market... because it's unclear, it's under-regulated. If I were the operator, I would move my digital exchange or crypto to other places," Chan said.
The consultation period for the regulation plan runs until the end of February.